Decision Variables: The only decision and policy variable of the firm under perfect competition is the determination of its output. Under monopoly, the demand curve of the firm or the industry is common and slopes downward throughout its length. There is nothing like putting on the head set, laying back and listening to some refreshing music when you are exhausted. Firms have total market share, which creates difficult entry and exit points. In monopoly, profits are usually earned both in the short-run as well as in the long-run. Firms in monopolistic competition face downward sloping demand curves but the demand is not perfectly elastic. Monopolistically competitive markets are also allocatively inefficient, as the price given is higher than Marginal cost.
The result is that the consumer is confused. Therefore, the sellers have to accept the price ascertained by the demand and supply forces of the market and sell the product, as much as they can at the price prevailing in the market. Figure 1 offers a reminder that the demand curve as faced by a perfectly competitive firm is perfectly elastic or flat, because the perfectly competitive firm can sell any quantity it wishes at the prevailing market price. Hence, the monopolist faces a trade-off between price and output. Alternatively, there is product disparity under monopolistic competition. On the other hand, goods and services offered in the monopolistic competition are not standardized. On the contrary, monopoly leads to a deviation from the socially desirable resource allocation.
Monopoly can be found in public utility services such as telephone, electricity and so on. Examples include stores that sell different styles of clothing; restaurants or grocery stores that sell different kinds of food; and even products like golf balls or beer that may be at least somewhat similar but differ in public perception because of advertising and brand names. Moreover, such firms are considered to be profit maximizers. In economics, the market is not just a place whereby parties engage in an exchange of goods or services for money but it refers to a system wherein there are many buyers and sellers for a product or service having complete knowledge about market conditions, who bargain and settle the price of the product to make the deal. When products are distinctive, each firm has a mini-monopoly on its particular style or flavor or brand name. Every one of these elements confines the section of different dealers in the market. There are three types of market structure, i.
Figure 1 illustrates the revenues and for a monopolist. Namely perfect competition, monopolistic competition, oligopoly, and monopoly. Monopolists are price searchers as in they have imperfect information regarding market demand. However, the differences are not so great as to eliminate other goods as substitutes. Thus every firm is a price taker and quantity adjuster.
Monopolistic competition is a competitive market setting wherein there are many sellers who offer differentiated products to a large number of buyers. For example, the distance test involves having a mechanical golfer hit the ball with a titanium driver and a swing speed of 120 miles per hour. Further, there are three types of imperfect competition, monopoly, oligopoly and monopolistic competition. Monopoly at the other extreme is characterized by only one firm producing the product. Consumers are likely to buy the product that is the best quality for the best price; which does not always mean the lowest price. We can give best examples of Cold Beverages like Pepsi and Coke for monopolistic competition.
If everyone in the economy wore only blue jeans, ate only white bread, and drank only tap water, then the markets for clothing, food, and drink would be much closer to perfectly competitive. Unlike a competitive firm, a monopolist restricts output to raise the price, so that he could gain at the expense of the consumers. Some intangible aspects may be promises like a guarantee of satisfaction or money back, a reputation for high quality, services like free delivery, or offering a loan to purchase the product. The firms have to accept the price determined by the industry. So, the firm can adopt price discrimination policy. Product differentiation becomes considerably less Amount Usually just one company.
Perfect and monopolistic competition have a large number of small firms, whereas, oligopoly consists of fewer firms that are relatively large in size. Additionally, dominating corporations find it difficult to leave such markets because of the profits they are enjoying. They differ from each other in design, colour, flavour, packing, etc. This results in a state of limited competition. A company does not need to make any changes in the way it runs things when it comes to such types. Titan is one of the companies that sell powerlifting equipment. The slope of the demand curve in a monopolistic show a downward trajectory, which is a representation of elastic demand.
In this type of market, firms are because they control the prices of goods and services. In this cluster of enterprises, each one takes independent decisions about the price and outcome by keeping in mind the market it operates in, a product it sells, and the related cost of production. The first was Edward Chamberlin of Harvard University who published The Economics of Monopolistic Competition. More than two and less than ten companies. There are quite a few different market structures that can characterize an economy.