Perfect competition is a market structure where all sellers sell homogeneous products, firms are price takers, and whose market share does not influence prices.  A monopoly market structure is one in which a single firm sells unique products in the market. In other words, the firm operating in a monopoly market does not face any competition as there are no close substitutes. Perfect competition and monopoly market structures have both similarities and differences. One of the similarities is that the numbers of firms are large in both market structures. Secondly, both perfect competition and monopolistic market structures have freedom of entry and exit into the market. In both market structures, firms can earn super-normal profits or incur huge losses within a short period.

However, the two types of market structures have several differences. One of them is that in a perfect competition market, firms produce homogenous products so that no seller has an advantage over the other, while in a monopoly market, products are unique and differentiated. The second difference is that in a perfect competition market, price is determined by the industry’s forces of demand and supply. However, in a monopoly market structure, every firm is free to set and adjust prices. Thirdly, firms in this market structure demand curve is positively elastic. However, in monopoly firms, the demand curve is elastic but sloping downwards. Read more

Examples include the foreign exchange markets. Examples of monopoly markets include Microsoft and Windows, natural gas companies, and DeBeers and diamonds. A monopoly is less efficient than the perfect competition because a monopoly does not produce enough output. Additionally, consumers will suffer in a monopoly market structure as firms will avail smaller quantities of products in the market at a higher price than it would have been in this market structure. The government allows monopolies for the benefit of economies of scale. This means that monopolies help ensure that firms keep costs as low as possible, and this benefits consumers.