Answer to Question #208999 in Microeconomics for Ahmed Ali

Question

Differentiate between monopoly and perfect competition with the help of curves explanation and example ? for each.

Answer 1

In a monopolistic market, only one firm determines the price and level of supply of goods and services. A perfectly competitive market is composed of many companies, in which no firm can control the market.

In a monopoly market, the prices of goods and services are usually high because the company completely controls the market. In this type of market, companies are price creators because they control the prices of goods and services. The company has full market share, creating difficult entry and exit points. Due to high barriers to entering a monopoly market, companies that can enter the market generally remain dominated by a larger company. Monopoly markets generally involve a single seller and buyers do not choose where to buy their goods or services. However, in a perfectly competitive market, prices are determined by supply and demand. Companies in a perfectly competitive market take prices, because no company has total control of the market. Unlike monopoly markets, companies in a perfectly competitive market have a small market share. Barriers to entry are relatively low, allowing businesses to get in and out easily. Unlike a monopoly market, a perfectly competitive market has many sellers and buyers, as costomers may decide where to purchase services as well as goods.