Difference between Perfect Competition and Monopoly
Basis |
Perfect Competition |
Monopoly |
---|---|---|
Meaning | It is a market situation where a large number of buyers and sellers deal in a homogeneous product at a fixed price set by the market. | It is a market situation where there is only one seller in the market selling a product with no close substitutes. |
Number of Sellers | This market has a very large number of sellers. | This market has a single seller. |
Number of Product | This market has homogeneous products. | There are no close substitutes in this market. |
Entry and Exit of Firms | There is freedom of entry and exit in this market. | There is a restriction on the entry of new firms and exit of old firms. |
Demand Curve | This market has a perfectly elastic demand curve. | This market is less elastic and has a downward-sloping demand curve. |
Price | As each of the firms in this market is a price-taker, the price is uniform. | As the firms in this market are price-maker, there is a possibility of price discrimination. |
Selling Costs | In this market, no selling costs are incurred. | In this market, only informative selling costs are incurred. |
Level of Knowledge | There is perfect knowledge of the market. | There is imperfect knowledge of the market. |
Difference between Perfect Competition and Monopoly
The number and types of firms operating in an industry and the nature and degree of competition in the market for the goods and services is known as Market Structure. To study and analyze the nature of different forms of market and issues faced by them while buying and selling goods and services, economists have classified the market in different ways. The different forms of market structure are Perfect Competition and Imperfect Competition (Monopoly, Monopolistic Competition, and Oligopoly).