MONOPOLY AND
MONOPOLISTIC
COMPETITION
Shiny Precila
A
MONOPOLY
The word MONOPOLY is made up of two syllables
MONO and POLY.
MONO means SINGLE POLY implies SELLING
FEATURES OF MONOPOLY
TYPES OF MONOPOLY
Simple No price
discriminatio BSNL
Monopoly n
Discriminati Different
ng price for
Airlines
different
Monopoly consumers
Natural Due to Gulf
natural factor countries for
Monopoly as location oil
Legal Approved by Indian
Monopoly government Railways
Due to
Technologic technical Microsoft
al Monopoly superiority and Apple
ADVANTAGES DISADVANTAGES
Encourages innovation. o Exploitation of consumers –
higher prices.
Encourages R&D. o Less consumer choice.
Economies of scale can be o Abnormal profit.
gained.
Good source of government o High barriers to entry.
revenue.
Internationally competitive. o Low quality goods and services –
no competition.
Massive profit. o Potential for inefficiency.
Requires less marketing budget. o Low wages to their employees.
MONOPOLISTIC COMPETITION
Monopolistic competition exists when many companies offer
competiting products or services that are similar, but not perfect,
substitutes.
It is a mix of both perfect competition and monopoly.
FEATURES OF MONOPOLISTIC
COMPETITION
Lack of
perfect
knowledg
e
EXAMPLES OF MONOPOLISTIC
COMPETITION
ADVANTAGES DISADVANTAGES
Better quality products at a lower o Higher price because of more
price. advertisement cost.
Product differentiation. o Misleading advertisement.
Easy to enter and leave the o Excess capacity.
market.
Customer can obtain great variety o Lack of standardized products –
of products and services. shift of focus.
Active business environment. o Excess waste of resources.
Customer has more information. o More product alternatives for
consumers.
Uplift innovation of the industry. o Impossibility to obtain abnormal
profits.
COMPARING MONOPOLY AND
MONOPOLISTIC COMPETITION
MONOPOLISTIC
MONOPOLY
COMPETITION
No. of sellers One Many
Free entry/exit No Yes
Close
None Many
substitutes
Firm has
market Yes No
power
Industry
No competition High
competition
Nature of
Homogenous Differentiated
product