Question

Discuss briefly with examples perfect competition and Monoply.

Answer 1

perfect competition : a market with large number or buyers and sellers is known as perfect competition market

characteristics of the perfect competition are:

• large number of sellers selling identical goods / homogeneous goods
• free entry and exit of the firms in the market means there is no barrier to the entry and exit of firms
• firms are price takers as large number of firms have a very small share in the market so cannot influence the price while industry is price maker
• buyers and sellers have perfect knowledge about the market  

example of perfect competition: perfect competition is said to be a theoretical concept which does not exit in real world so it is difficult to find a real example. the market for agriculture goods is said be an example of a near perfect market. we can observe that there are large number of seller and buyer of fruits, vegetables and other agricultural products in the market and sellers sell these products at almost same prices with tough competition among themselves.

Monopoly: it is a market situation with single seller and large number of buyers in the market.

characteristics:   

• single seller in the market selling his product  
• no close substitutes of the product
• there is no competition in the market
• monopolist have control over price of his product
• there is strong barrier to the entry of firms in the market

example: the example of monopoly are:  

electricity : the right of electricity distribution is under a single corporation

Microsoft: provide OS for PCs

telephone and telegraph etc. comes under government monopoly.