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CS foundation – Business economics and statistics – Comparison between Perfect competition and Monopoly

BasisPerfect competitionMonopoly
Number of SellersLarge number of sellers and no individual seller has control over the activities of other firmsSingle seller and monopolist has full control over the supply.
Nature of ProductHomogeneousThere are no close substitutes of the product.
Entry and ExitThere is freedom of entry and leads to absence of abnormal profits and losses in the long run.There is restriction on entry and exit. So, a firm can earn abnormal profits and losses in the long run.
PriceFirm is a price-taker as price is determined by the industry.Monopolist is a price-maker as firm and industry are one and the same thing.
Level of KnowledgeBuyers and sellers have perfect knowledge about market conditions.Buyers and sellers do not have perfect knowledge.
Demand CurveThe Demand curve is perfectly elastic as price remains same at all levels of output.Demand curve slopes downward as more output can be sold only at less price.
Selling CostNo selling cost is incurred as buyers and sellers have perfect knowledge about market conditions.Selling cost is incurred for i8nformative purposes due to lack of perfect knowledge.
December 2, 2016

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