Discuss under what circumstances a monopolistically competitive industry could become an oligopoly, could become a monopoly, could become purely competitive

Monopolistic competition refers to the market structure characterized by a large number of buyers, a large number of sellers dealing in slightly differentiated but substitute goods. The bargaining power of the monopolist firm lies in the fact that the products they offer to the buyer is a bit different from each other and attract buyers based on product differentiation.

Oligopoly is characterized by the presence of a few large sellers who dominate the market. The market strategies are affected by one another, and hence, there is a trail of actions and reaction amongst the sellers in the market. Monopolistic Competition could turn into an oligopoly market if many of the existing sellers' exit market; leaving only a few countable numbers which can eventually divide large market share amongst them.

Monopolistic competition can turn into a monopoly when all the sellers exit the market except one which the lowest average cost of production. He would become the only seller, i.e., the monopolist enjoying the total market share.

Monopolistic competition can turn into a perfectly competitive market when all the sellers start dealing in a similar and homogeneous product, leaving no scope for bargaining power with the seller. The market would then be efficient both in terms of production as well as allocation.