Similarities and Differences between Perfect Competition and Monopoly

 

Similarities between Perfect Competition and Monopoly

a.      Under both markets, the objective of the firm is to maximize the profit.

b.     Under both markets, the conditions of the equilibrium are same i.e. MR=MC and MC intersect MR from below.

c.      Due to the operation of the law of variable proportions both AC and MC curves are U-shaped on both markets.

d.     In the short-run, both markets have possibilities of abnormal profit, normal profit and loss.

e.      Both markets have large number of buyers.

Difference between Monopoly Market and Perfect Competition

Perfect Competition	Monopoly
i.There are large number of firms.	a.There is only one firm.
ii. The products are homogeneous.	b.The products are unique.
iii.Firms have freedom to enter or exist from the industry under perfect competition.	c.There is complete barrier in the entry and exit of the firm in the industry.
iv.In the long run, the firm earns only normal profit.	d.The firm can enjoy super normal profit even in the long run.
v.AR and MR are equal and are horizontal and parallel to the X-axis.	e.Both AR and MR curves are downward sloping.
vi.The price is stable.	f.The price may change.