What is the difference between monopoly and monopolist competition? Ex

Question

What is the difference between monopoly and monopolist competition? Explain the characteristics of firm’s equilibrium under monopolistic competition.

(i) State the relationship between total cost and marginal cost.
(ii) From a given total cost
TC= 100+0.5q+0.4

Find out the fixed cost, average variable cost, and marginal cost.

11 Sep 2024

Answer :

Word Count : 744

Feature	Monopoly	Monopolistic Competition
Number of Firms	Single firm	Multiple firms
Product Type	Unique product, no close substitutes	Differentiated products, close substitutes
Market Power	High, can set prices	Limited, influenced by competition
Price Control	High degree of control over prices	Some control, but influenced by competitors
Barriers to Entry	High, significant barriers (e.g., patents, economies of scale)	Low, relatively easy for new firms to enter
Demand Curve	Downward sloping, more elastic	Downward sloping, but more elastic than monopoly
Pricing Strategy	Can set higher prices, less competitive	Prices tend to be lower, competition drives prices down
Profit Maximization	Can earn long-term economic profits	Normal profits in the long run; firms may earn economic profits in the short run
Consumer Choice	Limited choice, only one supplier	Greater variety and choice among products
Efficiency	Allocative and productive inefficiency (deadweight loss)	More efficient than monopoly, but still not perfectly efficient
Examples	Public utilities (electricity, water)	Fast food restaurants, clothing brands

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