POST GRADUATE DIPLOMA IN MANAGEMENT (PGDM –ii Sem)Submitted To: Submitted By:
Comparative analysis of perfect competition and monopoly PERFECT COMPETITION: Monopoly is a market structure with complete market control. As the only seller in the market, a monopoly controls the supply-side of the market Pure Perfect MonopolyCompetition More competitive (fewer imperfections)
MONOPOLY: Monopoly is a market structure with complete market control. As the only seller in the market, a monopoly controls the supply-side of the market Pure Perfect MonopolyCompetition Less competitive
Number of Firms PERFECT COMPETITION: Perfect competition is an industry comprised of a large number of small firms, each of which is a price taker with no market control. MONOPOLY : Monopoly is an industry comprised of a single firm, which is a price maker with total market control.
Available Substitutes PERFECT COMPETITION: Every firm in a perfectly competitive industry produces exactly the same product as every other firm. An infinite number of perfect substitutes are available. MONOPOLY: Monopoly firm produces a unique product that has no close substitutes and is unlike any other product.
Resource Mobility PERFECT COMPETITION: Perfectly competitive firms have complete freedom to enter the industry or exit the industry. There are no barriers. MONOPOLY: A monopoly firm often achieves monopoly status because the entry of potential competitors is prevented.
Information PERFECT COMPETITION: Each firm in a perfectly competitive industry possess the same information about prices and production techniques as every other firm. MONOPOLY: A monopoly firm, in contrast, often has information unknown to others.
Characteristics of Perfect Competition Consumers pay the full price of the product. There is a large number of buyers and sellers, each of which is small relative to the total market. All firms in the same industry produce a homogeneous product. No barriers to entry or exit exist. All economic agents possess perfect information.
Characteristics of Monopoly One seller. Homogeneous or differentiated product. Complete barriers to entry. The two most common barriers to entry: Economies of scale. Legal restrictions.