Question
In: Economics
What is the one big difference in perfect competition and monopolistic competition market structures?
What is the one big difference in perfect competition and monopolistic competition market structures?
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Expert Solution
The one big difference im perfect competition and monopolistic competition market structure is-
Under perfect competition all sellers sell homogeneous products i.e identical products. An important conclusion can be drawn from this feature. It is that buyers will have no reason to prefer the product of one seller to the product of another seller. Thus, the price of the product throughout the market will be same. Example - agricultural goods
Whereas firms under monopolistic competition sell differentiated products. Product differentiation is a distinct feature of monopolistic competition. Different firms often charge different price for their product. Differentiation implies rival firms are selling products which are not perfect substitutes but close substitutes each other. Therefore each firm tends to exercise some control over price. Example - Colgate toothpaste and close up toothpaste.
Rahul Sunny answered 2 years agoRelated Solutions
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