The model of monopoly behavior is not entirely different from perfect competition, however, because both stem from the profit maximization hypothesis and both conclude that firms will set marginal revenue equal to marginal cost. One key difference is that firms in perfect competition will be price takers whereas monopolists are price setters. Since the monopolist is a price setter facing the whole market demand curve, marginal revenue will be lower than price. Thus, in the course of maximizing profits, the monopolist will set price above marginal revenue and marginal cost. Price greater than marginal cost implies a misallocation of resources from a social welfare perspective, or in other words, deadweight loss.
Oligopolies are industries in which only a handful of sellers exist.
Many major manufacturing industries are oligopolies, with automobile production being a prime example. The barriers to entry may include very large economies of scale that make it economically impossible to sustain a number of competitors each producing at or near minimum efficient scale. This situation makes game theory a very useful approach for studying oligopoly. However, unlike monopoly and perfect competition, there is no single model that captures the relevant features for oligopoly, making it both difficult but in many ways more interesting to study. Monopolistic competition combines elements of both perfect competition and monopoly.