Monopoly Vs Perfect Competition

Perfect Competition VS

Monopoly

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Both monopoly and perfect competition are two types of market structure and there are many similarities and differences between them.

Similarities

1. Maximum Profit

2. Equilibrium Condition

3. Determination of Price

4. Cost Curves

Differences

1. The industry consists of very large numbers of firms in PC while in Monopoly A single firm represents the whole industry.

2. Producer is Price Taker in case of PC while Price maker in monopoly

3. Consumer’s Sovereignty exists in PC and Producer’s Sovereignty in monopoly.

4. In PC a single firm can’t effect the price but monopolist use Monopoly power.

5. No technical barriers in PC but a new firm can’t enter in case of Monopoly.

CONT…

6. Price Discrimination

7. Equilibrium Condition

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CONT…

7. In PC producer can bear Normal and Abnormal profits as well as losses and even shut down point but in Monopoly producer only earn profit e.g. Normal and Abnormal profit.

8. In PC, short run producer earn Normal Profit, abnormal profit but in Monopoly firm earn Abnormal profit.

9. Under PC, in the long run, a firm can earn only normal profit, while a monopolist firm earn supernormal profit.

10.Close Substitution exists in PC but not in Monopoly.

11. In PC, MR=AR=P while in Monopoly equilibrium, price > MC.

12. Shape of the demand curve.

13. Second condition for equilibrium may differ

in monopoly and PC.

Any Question???