Question

Distinguish between perfect competition and monopolistic competition on the basis of the following:

1. Number of sellers
2. Nature of product
3. Selling cost

Answer 1

	Basis	Perfect Competition	Monopolistic Competition
a	Number of Sellers	Under perfect competition, there exists a large number of sellers for a particular commodity.	Under monopolistic competition, there also exists a large number of sellers for a commodity.
b	Nature of Product	Firms under Perfect Competition, sell homogeneous products that are perfect substitutes of each other.	Firms under this market structure produce similar yet differentiated products that are ‘close’ substitutes of each other.
c	Selling Cost	No selling cost is required.	The selling cost is very significant.