Question 21 of 27
Q.Compare perfect competition and monopoly.
Yanam BieapBIEAP AP Intermediate (1st Year) Commerce Board 2023Subjective· 5mImportance★★★★★est
78% · 21/27 Questions
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Start your 14-day free trial to unlock the full solution →Perfect competition and monopoly differ sharply: perfect competition has many sellers, a uniform product, free entry, a single price and a price-taking firm, whereas monopoly has one seller, a unique product, blocked entry, possible price discrimination and a price-making firm that can earn supernormal profit even in the long run.
Comparison of perfect competition and monopoly
| Basis | Perfect Competition | Monopoly |
|---|---|---|
| Number of sellers | Very large number of sellers | Single seller |
| Number of buyers | Very large number of buyers | Many buyers |
| Nature of product | Homogeneous (identical) product | Product with no close substitute |
| Control over price | No control; firm is a price taker | Considerable control; firm is a price maker |
| Entry and exit | Free entry and exit of firms | Strong barriers; entry is blocked |
| Price | One uniform price prevails | Price fixed by the monopolist |
| Price discrimination | Not possible | Possible, by charging different prices to different buyers |
| Demand curve (AR) | Perfectly elastic, horizontal | Downward sloping, less elastic |
| Relation of AR and MR | AR equals MR | AR is greater than MR |
| Long-run profit | Only normal profit | Supernormal profit can continue |
| Selling costs | Not necessary | May be incurred |
Points of comparison explained
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