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Difference Between Monopoly & Perfect Competition

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Ishan Gupta
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21 views

Difference Between Monopoly & Perfect Competition

Uploaded by

Ishan Gupta
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PPTX, PDF, TXT or read online on Scribd
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Monopoly and Perfect

Competition | Difference
Mrs. A. Pooja Narayan
Difference

• 1. Output and Price:


• Under perfect competition price is equal to marginal cost at the equilibrium
output. While under monopoly, the price is greater than average cost.
• 2. Equilibrium:
• Under perfect competition equilibrium is possible only when MR = MC and MC
cuts the MR curve from below. But under simple monopoly, equilibrium can be
realized whether marginal cost is rising, constant or falling.
• 3. Entry:
• Under perfect competition, there exist no restrictions on the entry or exit of
firms into the industry. Under simple monopoly, there are strong barriers on the
entry and exit of firms.
• 4. Discrimination:
• Under simple monopoly, a monopolist can charge different prices
from the different groups of buyers. But, in the perfectly competitive
market, it is absent by definition.
• 5. Profits:
• The difference between price and marginal cost under monopoly
results in super-normal profits to the monopolist. Under perfect
competition, a firm in the long run enjoys only normal profits.
• 6. Supply Curve of Firm:
• Under perfect competition, supply curve can be known. It is so
because all firms can sell desired quantity at the prevailing price.
Moreover, there is no price discrimination. Under monopoly, supply
curve cannot be known. MC curve is not the supply curve of the
monopolist.
• 7. Slope of Demand Curve:
• Under perfect competition, demand
curve is perfectly elastic. It is due to
the existence of large number of firms.
Price of the product is determined by
the industry and each firm has to
accept that price. On the other hand,
under monopoly, average revenue
curve slopes downward. AR and MR
curves are separate from each other.
Price is determined by the monopolist.
It has been shown in Figure 10.
• 8. Goals of Firms: • 9. Comparison of Price
• Under perfect competition and • Monopoly price is higher than
monopoly the firm aims at to perfect competition price. In
maximize its profits. The firm long period, under perfect
which aims at to maximize its competition, price is equal to
profits is known as rational firm. average cost. In monopoly, price
is higher.
• 10. Comparison of Output:
• Perfect competition output is higher than monopoly price. Under
perfect competition the firm is in equilibrium at point M1 (As shown in
Fig. 11 (a)), AR = MR = AC = MC are equal. The equilibrium output is
ON1. On the other hand monopoly firm is in equilibrium at point M
where MC=MR. The equilibrium output is ON. The monopoly output
is lower than perfectly competitive firm output.
Summary of Comparison

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