Question
Compare between monopoly and monopolistic competition.
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S. No
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Basis
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Monopoly
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Monopolistic Competition
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1.
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Meaning
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Monopoly refers to a market situation where there is a single seller selling a product which has no close substitutes.
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Monopolistic Competition refers to a market situation in which there are large number of firms selling closely related but differentiated products.
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2.
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Number of Sellers
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There is a single seller and the monopolist has full control over the supply.
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There are large number of sellers. So, a firm does not have much impact on activities of other firms.
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3.
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Nature of Product
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There are no close substitutes of the product. So, there is no competition from new and existing products.
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Products are differentiated on the basis of brand, size, colour, shape etc. So, a firm is in a position to influence the price.
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4.
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Entry or Exit
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There is restriction on entry and exit. So, a firm can earn abnormal profits in the long run.
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Although there is freedom of entry and exit but it is possible only for a competitive firm to enter or leave the industry.
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5.
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Price
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Monopolist is a price-maker as firm and industry are one and the same thing.
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Firm is neither a price-taker nor a price maker but has partial control over price due to product differentiation.
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6.
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Demand Curve
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Downward sloping demand curve is less elastic due to absence of close substitutes.
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Downward sloping demand curve is more elastic due to presence of close substitutes.
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7.
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Selling Cost
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Low selling costs are incurred.
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Heavy selling costs are incurred on sales promotion.
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