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Differences between monopoly and monopolistic market competition.

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  • Essay length: 1087 words
  • Submitted: 28/06/2010
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AS and A Level Markets & Managing the Economy

The first 200 words of this essay...

DIFFERENCES BETWEEN MONOPOLISTIC COMPETITON AND MONOPOLY MARKET STRUCTURE

Monopolistic competition and monopoly are two market structures existing on rather two extremities of the market structure analysis. In this essay I will give their definitions, discussing their characteristics, giving their differences and concluding with an overview of what I have been able to achieve.

Amos WEB (2000-2010) defines Monopolistic competition as a market structure in which a large number of firms manufacture and produce not necessarily the same product but similar products but still maintain a substantial amount of profit. For example, the manufacturing of pens, firms manufacturing these can be said to exist in a monopolistic competition market where four or more firms manufacture the same product or similar products in this case pens. There is freedom of entry and exit and extensive knowledge of prices and technology.

The diagram above represents monopoly competition.

It has four characteristics, which are:

1. Large number of small firms: This market contains large numbers of comparatively small firms when compared to the size of the market. This gives for high rate of competition and little control over price or quantity.

2.

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