Question

Discuss three differences between a perfectly competitive market and a monopoly.

Give three points of difference between perfect competition and monopoly.

Answer 1

	Basis	Perfectly competitive market	Monopoly
1.	Number of Sellers	Large number of small sellers.	There exists only single seller.
2.	Product	Products of all sellers are homogeneous.	Monopolist may sell homogeneous or differentiated products.
3.	Demand	The firm here faces a perfectly elastic demand curve.	Monopoly firm has a downward sloping but less elastic demand curve.
4.	Price	Uniform price prevails in the entire market and every firm here is a price-taker.	Monopoly firm may or may not charge uniform price from its different buyers. Firm here is a price-maker.
5.	Entry of Firms	There is no restriction on the entry or exit of firms in the market.	Entry of new firms in the market is restricted.
6.	Selling Costs	No selling costs are incurred here.	Only informative selling costs are incurred.
7.	Practicability	It is not seen in real life.	It is rarely seen.