Comparison Between Monopoly And Perfect Competition:

In the perfect competition and monopoly, maximum profit is the primary objectives of the firm and, the objective is attained at the output at the output level where M C = MR. Despite some similarities, there are a number of important difference between the perfect competition and monopoly models.

(i) Number of firms in the Industry: There is a very large number of small firms (sellers) and buyers in perfect competition. Price is determined for the entire industry by the forces of demand and supply, and each firm is a price - taker. On the other hand, a pure monopoly is an industry with only one firm, and the firm fixes the price for its production. It is therefore called a price setter.

(ii) Output and price: The perfectly competitive price is lower than the level of output greater than the monopoly price and output, respectively.

(iii) Equilibrium conditions: Under perfectly competitive equilibrium MC = MR = Price (AR) because MR and AR coincide and is a straight line parallel to the quantity axis. Under monopoly, the AR curve slopes down to the left with MR curve below it. They are at equilibrium when MC = MR < Price (AR).

(iv) Profit maximization positions in the long-run: In the long-run, the firm in perfect competition will earn normal profit because the short-run supernormal profits are competed away by the new firms that will enter the industry. On the contrary, the monopoly firm will always earn supernormal profits in the long-run because there are barriers preventing entry of new firms and competition.