Question

Give any three points of difference between monopoly and monopolistic competition.

Answer 1

Monopoly differs from monopolistic competition in the following ways :

(i) In a monopoly, there is a single seller of a product, whereas, under monopolistic competition, there is a large number of sellers (firms) selling a product.

(ii) A monopolist produces or sells a product which has no close substitutes. On the other hand, the various firms working under monopolistic competition produce and sell differentiated products but they are close substitutes for each other.

(iii) In the case of monopoly, there are strong barriers to the entry of new firms into the industry. Under monopolistic competition, there are no restrictions to the entry of new firms.