Explain the difference between Perfect competition and Monopolistic competition. Would you prefer to give up economic...

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Explain the difference between Perfect competition and Monopolistic competition. Would you prefer to give up economic...

Explain the difference between Perfect competition and Monopolistic competition. Would you prefer to give up economic efficiency and a higher cost to have monopolistic competitive markets?

business economics

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Answer 1

Answer #1

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The difference between perfect competition and monopolistic competition are as follows

(1) Perfect competition acts as a price taker while monopolistic competition act as a price maker

(2) Perfect competition has many sellers and buyers while there are single seller in monopolistic competition

(3) Perfect competition has homogeneous product while monopolistic competition has differentiated product

(4) In case of perfect competition, the demand curve is perfectly elastic while in case of monopolistic competition, it is negatively sloped and more elastic

No , As there is no allocative as well as product efficiency in long run which leads to economic efficiency in long run in case of monopolistic competition while in case of perfect competition, we have long run allocative efficiency (P=MC) as well as product efficiency ( min Long run Average Cost).

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Answer 2

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Explain the difference between Perfect competition and Monopolistic competition. Would you prefer to give up economic...

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