Monopoly and oligopoly are economic market conditions. Monopoly is defined by the dominance of just one seller in the market; oligopoly is an economic situation where a number of sellers populate the market.
Monopolistic markets are controlled by one seller only. The seller here has the power to influence market prices and decisions. Consumers have limited choices and have to choose from what is supplied. The monopolist asserts all the power while the consumer is left with no choice. This market condition usually arises from mergers, take-overs and acquisitions.
Oligopoly, on the other hand, is a market condition where numerous sellers co-exist in the market place. This market situation is very consumer-friendly because it induces competition amongst sellers. Competition in turn ensures moderate prices and numerous choices for consumers. A decision taken by one seller in an oligopolistic market has a direct effect on the functioning of other sellers.
edit Sources of power
A monopolistic market derives its power through three sources: economic, legal and deliberate. A monopolistic entity will use the position it is in to its advantage and drive out competitors either by reducing prices to such an extent that survival for another seller may become impossible or by virtue of economic conditions like large capital requirement for startup companies. Legal barriers like intellectual property rights also help a monopolistic entity retain its power. Deliberate attempts for monopolistic markets would include collusion, lobbying governmental authorities etc.
Though an oligopolistic market does not have any sources of power, it comes into existence solely due to the accommodating nature of other sellers.
A monopolistic market may quote high prices. Since there is no other competitor to fear from, the sellers will use their status of dominance and maximize their profits.
Oligopoly markets on the other hand, ensure competitive hence fair prices for the consumer.
edit Monopolistic Production
This video explains how monopolies reduce production and increase prices in the market.
Long Island Rail Road and Long Island Power Authority are examples of monopolistic markets.
Oligopoly exists in Australia in the telecom sector (Telstra rents phone lines to other providers and they subsequently rent to customers), the grocery business(Coles and Woolworths) and media outlets (News Corporation, Time Warner and Fairfax Media).