Question

Distinguish between monopoly and monopolistic competition on the basis of average revenue curves.

Answer 1

Sr. No.	Basis	Monopoly	Monopolistic Competition
1.	AR curve Slope	The AR curve is steeply downward sloping.	The AR curve is gently downward sloping.
2.	Price sensitivity	Due to no close substitutes, the firm can reduce the price without losing many buyers.	Due to the availability of close substitutes, demand is more sensitive to price changes.
3.	Elasticity of demand	The AR curve is less elastic (inelastic demand).	The AR curve is more elastic (elastic demand).
4.	Control over price	The firm has complete control over pricing.	The firm has limited control over price due to competition.
5.	Price changes to increase sales	To sell more, the monopolist must reduce the price significantly.	Firms reduce their prices slightly to attract more buyers.