Distinguish between Monopoly and Monopolistic Competition.

Distinction between monopoly and monopolistic competition: The following are the main difference between monopoly and monopolistic competition:

Monopoly

  1. Number of Sellers : Only one seller of a product.
  2. Nature of product : All selling same product.
  3. Freedom of entry & Exit : There is exist barrier for the entry of the firms in the market.
  4. Degree of Elasticity of Revenue curve : AR curve is less elastic because of the close substitutes of the monopoly product.
  5. Selling costs : Selling costs are required only for introduction of the product in the market and not for sales promotion.
  6. Nature of long run profit : Monopolist may continue to earn super normal profit because in the situation of long run equilibrium price is generally greater than long run average cost i.e., AR > LAC

Monopolistic :

  1. Number of Sellers : Large number of sellers.
  2. Nature of product : The products are different.
  3. Freedom of entry & Exit : Firms are free to enter or exit.
  4. Degree of Elasticity of Revenue curve : AR curve is more elastic because of the availability of large numbers of close substitutes.
  5. Selling costs : Selling costs are more or less depend on the monopolistic competition.
  6. Nature of long run profit : Monopolistic competitive firm can earn only norm al profits in the long run because in the situation of long run equilibrium average revenue is equal to long run average cost i.e., AR = LAC
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