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In: Economics

Compare and contrast the market structures of pure competition and pure monopoly. In your answer, make...

Compare and contrast the market structures of pure competition and pure monopoly. In your answer, make sure you discuss the assumptions and evaluate the short and long-run results of each market structure. (You may want to use graphs.)

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Expert Solution

The differences in two market structures are given below

  • While pure competition sells identical good, pure monopoly sells unique product
  • There are very large number of sellers in pure competition but only one seller in pure monopoly
  • Firm faces flat demand curve in pure competition while firm faces downward sloping demand function under pure monopoly
  • There is free entry and exit in pure competition in long run while there are entry barriers in pure monopoly
  • Due to free entry and exit, pure competition has no economic profit / loss in the long run. Pure monopoly can sustain profits in long run by blocking entry
  • Firms are price takers in pure competition while firms are price maker when they are a pure monopoly.

Graphically, several other differences are shown below

Rahul Sunny answered 2 years ago
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