Tutors on net
Tutors on NetTutors on Net

Similarities And Dissimilarities Between Monopoly Competition

 Similarities and Dissimilarities between Monopoly Competition and Perfect Competition

Similarities

The two market situations have the following similarities.

  1. The number of firms is huge under perfect competition and monopolistic competition.
  1. The freedom of entry and exit of firms is there in both the firms.
  1. Firms compete with each other.
  1. The break even point is established where marginal cost and marginal revenue are equated.
  1. In both the market conditions, firms can earn super normal or abnormal profits and can also incur short run loses. Whereas in the long run, firms earn only normal profits.

Dissimilarities

There are nevertheless certain points of dissimilarities in both the market situations.

  1. In the market situation of perfect competition, each firm produces and sells a standardised product so that no buyer has any likings for the commodity of any individual seller over others.

    Alternatively, there is product disparity under monopolistic competition. The commodities may be similar or more likely to each other however they are not identical. They are close substitutes. They are diverse in the form, in the design, in the colour, in the flavour, packing etc. We can give best examples of Cold Beverages like Pepsi and Coke for monopolistic competition.
  1. Under Perfect Competition, price is determined by the influences of demand and supply for the entire industry. Every firm has to sell its product at that price. It cannot influence price by its solitary performance. It has to fiddle with its output to that price. Thus every firm is a price taker and quantity adjuster.

    Conversely, every firm has its own price policy under monopolistic competition. It cannot control more than a diminutive segment of the total productivity of a product in a gathering.
  1. Graphically, the demand curve AR of a firm is perfectly elastic under perfect competition and the marginal revenue MR curve coincides with it.

    As against this, the demand curve of a firm is elastic and downward inclining under monopolistic competition and its corresponding MR curve lies below it. It entails that a firm will have to reduce the price of its product to increase its sales by attracting some customers of its competitors, provided latter do not reduce their prices. 
  1. Though the equilibrium stipulations of the two market conditions are the same yet there are disparities in the price marginal cost relationship between the two. When under perfect competition MC = MR, price also equals them since price AR = MR.

    This is for the reason that, the AR curve is horizontal to the X axis. Since the AR curve inclines downward to the left, the MR curve is below it under monopolistic competition. So price, AR > MR = MC.
  1. Another disparity amid the two market situations corresponds to their dimensions. In the long run competitive firms are of the optimum sized and produce to their full capacity for the reason that prior AR = LMC = LAC at its minimum.

    But under monopolistic competition the firms are of less than the optimum size and possess surplus capacity since the AR curve is downward inclining and cannot be tangent to LAC curve at its minimum point. The firm’s equilibrium situation is Price AR = LAC > LMC = MR.
  1. Yet another dissimilarity among the two with respect to selling cost. There is no problem with regards to selling under perfect competition since products are standardised and hence no selling costs. The firm can sell the ruling market price any quantity of its product.

    Whereas under monopolistic condition, the product is diversified and selling costs are obligatory to promote sales. They are incurred to influence a purchaser to buy one commodity in choice to other.
  1. The ultimate decision amid the perfect competition and monopolistic competition is that the output of the firm under monopolistic competition is lesser and price is higher than under perfect competition.

The comparison of the perfect competition and monopolistic competition is presented diagrammatically below.

                                   

Online Live Tutor Similarities, Dissimilarities:

       We have the best tutors in Economics in the industry. Our tutors can break down a complex Similarities, Dissimilarities problem into its sub parts and explain to you in detail how each step is performed. This approach of breaking down a problem has been appreciated by majority of our students for learning Similarities, Dissimilarities concepts. You will get one-to-one personalized attention through our online tutoring which will make learning fun and easy. Our tutors are highly qualified and hold advanced degrees. Please do send us a request for Similarities, Dissimilarities tutoring and experience the quality yourself.

Online Similarities and Dissimilarities between Monopoly Competition and Perfect Competition Help:

        If you are stuck with an Similarities and Dissimilarities between Monopoly Competition and Perfect Competition Homework problem and need help, we have excellent tutors who can provide you with Homework Help. Our tutors who provide Similarities and Dissimilarities between Monopoly Competition and Perfect Competition help are highly qualified. Our tutors have many years of industry experience and have had years of experience providing Similarities and Dissimilarities between Monopoly Competition and Perfect Competition Homework Help. Please do send us the Similarities and Dissimilarities between Monopoly Competition and Perfect Competition problems on which you need help and we will forward then to our tutors for review.

Other topics under Product Pricing: