compare the market environment of monopolistic competition with that of perfect competition quoting real world business...

compare the market environment of monopolistic competition with that of perfect competition quoting real world business examples.

Expert Solution

Monopolistic competition is the sub part of imperfect competition. Whereas, perfect competition is itself a different phenomenon. The major differences in both the markets are, perfect competition possess free entry and exit for both sellers and buyers, but for monopolistic market this characteristic is missing. In perfect competition all the products are similar. But in monopolistic competition there is product differentiation and there are quite a number of sellers and and single buyer (consumers are regarded as a single community) with no privileged of entry-exit choices.

If we consider the production cost scenario, then the difference between both the markets are of advertising cost. Monopolistic market spends a chunk of money in advertising their products and increasing their sells due to heavy competition in the market, whereas perfect competition doesn't fancy advertising because all the sellers sell similar products.

Last but not the least, textbook industry, cereal industry, shoe producing industry are few real world examples of monopolistic competition. But perfect competition is strictly a theoretical concept. It is debated that perfect competition doesn't exist in real world.

Rahul Sunny answered 1 year ago

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