Monopoly And Perfect Competition – Compare and Contrast Essay

Monopoly Vs Perfect Competition Assignment Instructions

Whether a firm is operating under PC or under MONOPOLY the objective or the goal of the firm is to maximize the profits. This suggests rationality on the part of the producer of both the market. In both the models the owner of the firm is also the manager entrepreneur there is no separation of ownership and management in both the models. In both the models profits maximization condition is satisfied when the necessary and sufficient condition are fulfilled.

The product is homogeneous in poor competition while in monopoly the product may or may not be homogeneous. In monopoly the total supply of the product is concentrated in single firm. While under prefect computation there are large numbers of sellers and none of them can influence the price by changing his price.

As PC and monopoly models are traditional models. Accordingly both depends upon the traditional cost concepts and curves. I other word the behavior both the models are explained with the help of U shaped cost curves. Shaped cost curves both in SR and LR. Such cost curve suggests that from each plant specific level of output can be produced.Monopoly is often considered to be inefficient compared to perfect competition.

  • Compare and contrast monopoly with perfect completion. Use graphical as well as verbal explanation.

Monopoly Vs Perfect Competition – Compare And Contrast Essay

Perfect competition and monopoly market stand for two extremes ranges of market structures. Perfect competition is a market structure that stands for the efficiency attained by an industry which lacks market control and which contains high competition. On the other hand, monopoly market stands for inefficiency attained as a result of strong market control and lack of competition. Monopoly market structure is characterized by single large firm with unique products and thus, this firm acts as the price maker for its products in the market. On the other hand, competitive market structure contains several minute firms that are price taker with no control of the market. Moreover, products in competitive market are easily substitutable while those in the monopoly market cannot be substituted, since they are very unique.

Read Also Sources Of Monopoly Inefficiency

Firms in perfect competition market have the freedom to enter and leave the market as they please. There is no any form of barriers or restriction in this industry. However, the entry in the monopoly market is highly restricted. This is deliberately done through imposition of law and increase in the requirements that a firm should meet before entering into the industry to prevent future competition. In addition to this, in competitive market, all firms contain the same information regarding the product, manufacturing techniques, and prices among others. This makes it hard for one firm to outshine others in the market. On the contrary, firms in monopoly market have unique information in which no other firm has and thus, each company remains unique with unique products in the market.  This gives firms in monopoly market the ability to produce goods that cannot be substituted (Amos Web 1).  The difference between competitive market and monopoly market is demonstrated by the graphs below: Q1 represent the quantity and P1 represent price in the competitive market, where Q and P represent quantity and price in the monopoly market.

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