Question

Distinguish between the following:

1. Perfect competition and Pure competition

2. Perfect competition and Monopoly

3. Natural monopoly and Social monopoly

4. Natural monopoly and legal monopoly

5. Perfect competition and Monopolistic competition

Answer 1

1)

Perfect Competition	Pure Competition
Factors of production are perfectly mobile.	Factors of production are immobile and cannot move from one industry to another.
Buyers and sellers have perfect knowledge about the prevailing market conditions.	Buyers and sellers have imperfect knowledge about the prevailing market conditions.
The characteristics of perfect competition are quite stringent, hence the existence of this market structure is a myth.	The characteristics of this market structure are comparatively liberal, hence, can be found in the real world.

2)

Perfect Competition	Monopoly
There are a large number of buyers and sellers.	There are a large number of buyers but only one seller.
Price discrimination is not possible.	Price discrimination is possible.
There is free entry and exit of firms.	The entry and exit of firms is restricted.

3)

Natural Monopoly	Social Monopoly
It is created due to the ownership of some natural resources.	It is created due to sole ownership and management by the government.
It arises because of factors such as good location, old establishment, goodwill of the firm and ownership of a natural resource.	​It is created deliberately for welfare motive.

4)

Natural Monopoly	Legal Monopoly
It is created due to the ownership of some natural resources.	It is created by the law.
It arises because of factors such as good location, old establishment, goodwill of the firm and ownership of natural resources.	It arises due to such provision as patents, copy rights, trade marks, etc.

5)

Perfect Competition	Monopolistic Competition
Products sold are homogenous in nature.	Products sold are differentiated in nature.
There is no selling cost involved.	Huge selling cost is involved.
Prices are determined by the forces of demand and supply. The firm is the price taker.	Every firm has its own pricing policy.