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Protection for Infant Industries

Question

Explain how monopoly differs from perfect competition.

Category:

Market Structures and Competition

Frequently asked question

Preview Answer

I. 🍃Introduction
- Definition of monopoly and perfect competition
- Importance of understanding the differences between the two

II. Market Share
- One supplier in monopoly, many suppliers in perfect competition
- Monopoly has ➡️➡️100% share of the market, while one perfectly competitive firm will have a small share of the market

III. Barriers to Entry and Exit
- Barriers to entry and exit in monopoly
- Free entry and exit in perfect competition

IV. Pricing Power
- A monopoly is a price maker, while a perfectly competitive firm is a price taker
- Implications for pricing strategies and consumer welfare

V. Advertising and Brand Loyalty
- A monopolist may advertise, while there is no advertising in perfect competition
- Brand loyalty may exist in monopoly, but no attachment between buyers and sellers in perfect competition

VI. Substitutes
- There are no substitutes in a monopoly, while there are perfect substitutes in perfect competition
- Implications for consumer choice and market competition

VII. 👉Conclusion
- Recap of key differences between monopoly and perfect competition
- Importance of promoting competition for consumer welfare and economic efficiency.

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