Difference Between Competition And Monopoly

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Perfect competitive and monopoly are the extreme of market structures. Therefore, the supply and price decision are totally difference between perfect competitive and monopoly.

As, perfect competitive, where there are many firm competing, none of which is large and freedom to entry and all firm products are homogenous products. Slomans, Wride and Garatt (2012) states firms are price takers. There are so many firms in the industry that each one producers an insignificantly small portion of total industry supply , and therefore has no power whatsoever to affect the price of the product since if firms rise the price, customers can choose another firm to consume which are lots of firm in market. Therefore, it faces a horizontal demand ‘curve’ at the market price: the price determined by the interaction of demand and supply in the whole market.
Price and output in the short run under perfect competition

Figure 1 (Riley 2012)
Output can only be adjusted when the profit is not the greatest, it will change the output in order …show more content…

However, monopolists have ability to change the market price according to amount they produce since they are the only source of products in the market. In figure 3, monopolists produce quantity by the intersection of MR and MC, it can decide the price determined by the quantity of market demand curve. Therefore, monopolists produce less but charge more. Once monopoly determines output level, it also determines the price.

Hall and Lieberman (2012) state monopoly can change different prices to different customers, based on differences in the prices they willing to pay that called price discrimination which have three major price discrimination. First-degree is a firm charge same price for each unit that customers are willing to pay. Second-degree where charge different price for different times that the customers consume. Third-degree where charge a different price to customers in different

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