produce at the lowest point on their average cost curves. In addition, the endless search to impress consumers

through product differentiation may lead to excessive social expenses on advertising and marketing.

Oligopoly is probably the second most common market structure. When oligopolies result from patented

innovations or from taking advantage of economies of scale to produce at low average cost, they may provide

considerable benefit to consumers. Oligopolies are often buffered by significant barriers to entry, which enable

the oligopolists to earn sustained profits over long periods of time. Oligopolists also do not typically produce at

the minimum of their average cost curves. When they lack vibrant competition, they may lack incentives to

provide innovative products and high-quality service.

The task of public policy with regard to competition is to sort through these multiple realities, attempting to
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