Monopoly and Monopolistic competition.
Distinction between Monopoly and Monopolistic Competition
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Monopoly |
Monopolistic Competition |
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|
1. |
There is single firm (or producer). |
1. |
There are many firms. |
|
2. |
Product has no close substitute. |
2. |
Product has many close substitutes. |
|
3. |
Product is homogeneous. |
3. |
Product is differentiated. |
|
4. |
Entry of new firm is very difficult. |
4. |
Entry of new firm in the market is free. |
|
5. |
Price discrimination is possible. |
5. |
Price discrimination by a firm is not possible. |
|
6. |
Selling costs are almost nil. |
6. |
Heavy selling costs are incurred. |
|
7. |
Demand curve (AR curve) is downward sloping but almost inelastic as no close substitute is available. |
7. |
Demand curve is downward sloping but very elastic as many substitutes are available. |
|
8. |
In the long-run firms manage to earn abnormal profit as entry is restricted. |
8. |
In the long-run abnormal profit is zero as there is free entry and exit of firms. |
