DIFFERENCE BETWEEN MONOPOLY AND MONOPOLISTIC COMPETITION

MONOPOLY

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.

MONOPOLISTIC COMPETITION

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.

CONCLUSION

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.

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