Question

1. How is a monopoly different from perfect competition? List all the ways you can think of.
   1. Why do we study them together? What do they tell us about competition?

Answer 1

Answer:Monopoly:It is a market structure of single seller selling a product with no competition and no subsitutes. .

Perfect Competition:When similar goods are produced and everyone gets all the knowledge about price and characterstics of a commodity and there is a persence of variuos sellers.This is known as perfect competition.

How they are different from each other

(a) Under monopoly,different price can charge from different buyers but under perfect competion no such thing exist

(b)We get strong entry barrier in monopoly competition but no entry barrier in perfect competition

(c).Price is greater than average cost in monopoly while price is equal to marginal cost in perfect competition

(d)High profit can attain in monopoly market but in perfect competition profit would be normal and that too in long run.

(e)In monopoly market equillibrium can be achieve,doesn't matter MC in any stage but in perfect competiton it should be MR=MC only to achieve equilibrium.

(2)We study them together because they are part of market structure.One should know whether its seller or consumer about market structure they are involve in and how to deal in these market structure to suvive and grow in it.

(3) Competition plays a vital role in economy because when more competitors in market,ultimately consumer get optimum product or service with fair price.And when people buy more products because price is fair in market,that motivates producer to produce more and that will finaly help in grow the economy.