Arrange the following market structures in the increasing order of pricing power to firms:
1. Monopolistic competition
2. Perfect competition
3. Duopoly
4. Monopoly
5. Oligopoly
Choose the correct answer from the options given below:

Correct option is B

The market structures are arranged in increasing order of pricing power, i.e., the ability of firms to set or influence prices, as follows:

1. Perfect Competition (2):

   • Firms in perfect competition have zero pricing power. Prices are determined by market forces, and individual firms are price takers.

2. Monopolistic Competition (1):

   • Firms have limited pricing power due to product differentiation. While they compete on quality and branding, substitutes exist, keeping their pricing power low.

3. Oligopoly (5):

   • Few large firms dominate the market. Pricing power is higher due to interdependence among firms and barriers to entry.

4. Duopoly (3):

   • A special case of oligopoly where two firms dominate. Pricing power is higher due to reduced competition.

5. Monopoly (4):

   • The firm has the highest pricing power as it is the sole supplier of the product with no substitutes.

Thus, the correct order is 2 (Perfect Competition) → 1 (Monopolistic Competition) → 5 (Oligopoly) → 3 (Duopoly) → 4 (Monopoly).

Information Booster:

1. Perfect Competition:

   • Many buyers and sellers; homogeneous products.
   • No barriers to entry or exit; firms are price takers.

2. Monopolistic Competition:

   • Large number of firms; products are differentiated by branding, quality, or features.
   • Firms have limited control over prices due to the availability of substitutes.

3. Oligopoly:

   • Few large firms dominate the market; products can be homogeneous or differentiated.
   • Firms influence prices through strategic interdependence (e.g., price wars or collusion).

4. Duopoly:

   • A specific type of oligopoly with two firms dominating the market.
   • Pricing decisions are highly interdependent.

5. Monopoly:

   • A single firm supplies the entire market.
   • High entry barriers and no substitutes give the firm maximum pricing power.

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