Monopoly and Perfect Competition

1045 Words Oct 24th, 2012 5 Pages
ODOFIN OLUFEMI A. ADP11/12/EX/MBA/0916
What is the difference between monopoly and perfect competition?

Firm under perfect competition and the firm under monopoly are similar as the aim of both the seller is to maximize profit and to minimize loss. The equilibrium position followed by both the monopoly and perfect competition is MR = MC. Despite their similarities, these two forms of market organization differ from each other in respect of price-cost-output. There are many points of difference which are noted below. (1)Perfect competition is the market in which there is a large number of buyers and sellers. The goods sold in this market are identical. A single price prevails in the market. On the other hand monopoly is a type of
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At point F a monopoly firm attains equilibrium producing OM, output at OP, price. OP competitive price is less than OP, (OP < OP,) and OM competitive output is greater than OM, output (OM > OM,).
(7) A monopolist can discriminate prices for his product, a firm working under perfect competition cannot. The monopolist will be increasing his total profit by price discrimination if he find? Elastic ties of demand are different in different markets.
As against his a competitive firm cannot change different prices from different buyers since he faces a perfectly elastic demand at the going market price. If he increases a slights rise in price he will lose the sellers and makes loss. Thus a competitive firm cannot discriminate prices which a monopolist can do.

The arguments against monopolies.
A - Incentives
1 - There is a separation of service and payment. Because monopolies are funded through taxation, they cannot go bankrupt - they can always get more funding from the public coffers. Therefore, monopolies have little incentive to be efficient.
2 - Monopoly by definition means no competition. So, unsatisfied customers have nowhere else to take their business. Monopolies can treat their customers like scum and not lose any business. Again, they have little incentive for efficiency.
3 - The actual incentives of monopolies are completely backwards compared with market
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