Buyers may have a small controlling power on the price of such products. In monopolistic competition, the barriers to entry and exit are comparatively low. Due to existence of many players in a monopolistic market, product predictability low. Your email address will not be published. Learn vocabulary, terms, and more with flashcards, games, and other study tools. Therefore, the demand curve of the monopolist is steep, i.e., less elastic. Our mission is to provide an online platform to help students to discuss anything and everything about Economics. (1) There is only one producer of a product under monopoly while there are a number of producers under monopolistic competition. Differentiated products, yet close substitutes. The monopoly firm is the industry. The basic difference is the number of players existing in monopoly and monopolistic competition markets. In perfect competition, the profit-maximizing output is when MR = MC which is the same for the monopolist. Monopoly firms’ source of power comes from elements such as copyrights or patents. In perfect competition, the product sold by different firms is identical, but in monopolistic competition, the firms sold near substitute products. Monopolistic Competition is a state in markets whereby there are a handful of sellers offering a particular product to consumers due to which minimal competition is created, and variants in the characteristics and quality of products are available. 1. The slope of the demand curve is horizontal, which shows perfectly elastic demand. Monopoly refers to a market structure where there is a single seller dominates the whole market by selling his unique product. On the contrary, there are many firms in monopolistic competition and industry is called a group. As a single firm regulates the whole market, there is no difference between firm and industry in the monopoly. Pure monopoly Monopoly is a market situation in which there is only one seller of a product with barriers to entry of others. producers can realize a markup and average total cost is not at a minimum for the quantity produced suggesting there is an excess capacity or an inefficient scale of production and the price is slightly higher than the perfect competition. Monopoly profit is ensured when the demand curve lies above the firm’s Average Total Cost (ATC) at the optimal quantity which is characterized by price P* > ATC. As a result, there is product differentiation. (5) In both market situations, the producer is a price-maker. In this article we will discuss about the similarities and dissimilarities between Monopoly and Monopolistic Competition. Parameters. As there are no close substitutes of the product, demand for the product in monopoly is inelastic. As a result, the demand for the products of every firm is more elastic and its demand curve is flat or more elastic. You may also have a look at the following articles to learn more –, All in One Financial Analyst Bundle (250+ Courses, 40+ Projects). Monopolistic competition is a global phenomenon prevalent in almost all sectors of the market. In perfect competition, the product offered is standardised whereas in monopolistic competition product differentiation is there. There is a single producer in a monopoly hence they do not have any incentive in producing differentiated products. CFA® And Chartered Financial Analyst® Are Registered Trademarks Owned By CFA Institute.Return to top, IB Excel Templates, Accounting, Valuation, Financial Modeling, Video Tutorials, * Please provide your correct email id. A monopoly in the market makes it extremely difficult for new entrants and the exit of the existing player, due to the good acceptability and nature of the product. There are three types of imperfect competition, namely, monopoly, oligopoly and monopolistic competition. Monopoly enjoys the sole control overall characteristics of its products. On the contrary, there are many firms in monopolistic competition and industry is called a group. Monopoly is the type of imperfect competition where a seller or producer captures the majority of market share due to lack of substitutes or competitors: Monopolistic competition is a type of imperfect competition where many sellers try to capture market share by differentiating their products. A monopoly is created by a single seller whereas monopolistic competition requires at least 2 but not a large number of sellers. Monopoly vs Monopolistic competition can be differentiated in terms of the number of firms and their relative sizes, the elasticity of demand curves that they face, ways that they compete with other firms for sales and ease/difficulty with which firms can either enter/exit the market. No competition exist in a monopoly market while stiff competition due to non-price competition exists between firms the monopolistically competitive market.