5. Both monopoly and perfect competition are two
types of market structure and there are many
similarities and differences between them.
Similarities
1. Maximum Profit
2. Equilibrium Condition
3. Determination of Price
4. Cost Curves
6. Differences
1. The industry consists of very large numbers
of firms in PC while in Monopoly A single
firm represents the whole industry.
2. Producer is Price Taker in case of PC while
Price maker in monopoly
7. 3. Consumer’s Sovereignty exists in PC and
Producer’s Sovereignty in monopoly.
4. In PC a single firm can’t effect the price but
monopolist use Monopoly power.
5. No technical barriers in PC but a new firm
can’t enter in case of Monopoly.
10. CONT…
7. In PC producer can bear Normal and
Abnormal profits as well as losses and even
shut down point but in Monopoly producer
only earn profit e.g. Normal and Abnormal
profit.
11. 8. In PC, short run producer earn Normal
Profit, abnormal profit but in Monopoly firm
earn Abnormal profit.
9. Under PC, in the long run, a firm can earn
only normal profit, while a monopolist firm
earn supernormal profit.
12. 10.Close Substitution exists in PC but not in
Monopoly.
11. In PC, MR=AR=P while in Monopoly
equilibrium, price > MC.
12. Shape of the demand curve.
13. Second condition for equilibrium may differ
in monopoly and PC.
