DIFFERENCE BETWEEN MONOPOLY AND MONOPOLISTIC COMPETITION
The word monopoly has been derived from the combination of two words i.e., ‘Mono’ and ‘Poly’. Mono refers to a single and poly to control.
In this way, monopoly refers to a market situation in which there is only one seller of a commodity.
There are no close substitutes for the commodity it produces and there are barriers to entry. The single producer may be in the form of individual owner or a single partnership or a joint stock company. In other words, under monopoly there is no difference between firm and industry.
The concept of monopolistic competition was put-forth by an American economist Prof. E.H. Chamberlin in his popular book, “The Theory of Monopolistic Competition” published in 1933.
Monopolistic competition is a type of imperfect competition market structure in which a large number of firms produce differentiated products and there are no barriers to entry.
The difference between monopoly and monopolistic competition is as follows:
|BASIS FOR COMPARISON||MONOPOLY||MONOPOLISTIC COMPETITION|
|MEANING||Monopoly refers to a market structure where a single seller produces/sells product to large number of buyers.||Monopolistic competition is a competitive market setting wherein there are many sellers who offer differentiated products to a large number of buyers.|
|NUMBER OF SELLERS||One seller in monopoly.||Large number of sellers are there.|
|PRODUCT DIFFERENTIATION||There is extreme product differentiation.||There is Slight product differentiation.|
|DEGREE OF CONTROL OVER PRICE||There is Considerable but very regulated control over price.||There is Some degree of control over price.|
|COMPETITION||In monopoly, competition does not exist.||There exists stiff competition exist between firms.|
|DEMAND CURVE||Demand curve is Steep sloping.||Demand curve is Flatter than demand curve in monopoly.|
|BARRIERS TO ENTRY AND EXIT||There exists barriers to entry and exit of firms.||There exists no barriers to entry and exit of firms.|
|DIFFERENCE BETWEEN FIRM AND INDUSTRY||There is no difference between firm and industry.||There exists the difference between firm and industry.|
In a monopoly market, it is possible for a firm to charge distinct prices from various customers, for the same product. So, the firm can adopt price discrimination policy. On the other hand, as non-price competition is prevalent in the market, therefore, price discrimination is not possible, so, no firm can charge different prices from different customers.