Monopoly vs Perfect Competition
Monopoly vs Perfect Competition
Perfect Competition
- In a perfectly competitive market, all firms sell undifferentiated products.
- No single firm has market power, so they must accept the market price.
- If there are profits to be made, new firms will enter the market, which drives prices down and eliminates the profits.
- In the long run, no company in a perfectly competitive market makes an economic profit.
Monopoly
- A monopoly owns its market and can set its own prices.
- It produces at a quantity and price that maximizes its profits.
- A good monopoly is a company that is so good at what it does that no other company can offer a close substitute.