Monopolistic Competitor vs Perfect Competitor ( Difference)

The Main Difference between Monopolistic and Perfect Competition

1) Firms in monopolistic competition spend more to differentiate their products than do firms in perfect competition, where products are identical. This higher cost of product differentiation shift up the average cost for monopolistic competition.

2)Firms in monopolistic are not producing at minimum average cost
They are said to have excess capacity. Excess capacity : the difference between a firms profit maximizing quantity and the quantity that minimizes average cost, firms with excess capacity could reduce average cost by increasing quantity.

3)Perfect competitor in the long run produces at the lower possible average cost.
In the long run monopolistic competitor produces less than required to achieve the lowest possible average cost.
In short , if the firms have the same cost curves , the monopolistic competitor produces less and charges more than the perfect competitor

Similarity :
1.Each firms acts independently, without regards to the responses of its competitors
2.Free entry guarantees that firms earn zero economic profits in the long-run

check out this website for more information
http://www.peoi.org/Courses/Coursestu/mic/fram6.html

Done by
Umar , Druvi, Snow, Shaun and Furzanne

Category:

Education

Tags:

• Perfect competiton
• Monopolistic Competition
• Taylors University
• Econ202