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Distinguish Between Monopoly, Monopolistic Competition and Oligopoly

Perfect competition is said to exist when a number of conditions are satisfied. They include two conditions of pure competition, viz., homogeneous product and a large number of dealers operating in the market and also other conditions, e.g. free entry and exit of the firms, absence of 4ransport costs, perfect knowledge among the dealers and perfect mobility of the factors of production

Distinguish between monopoly, monopolistic competition and oligopoly

Perfect competition is said to exist when a number of conditions are satisfied. They include two conditions of pure competition, viz., homogeneous product and a large number of dealers operating in the market and also other conditions, e.g. free entry and exit of the firms, absence of 4ransport costs, perfect knowledge among the dealers and perfect mobility of the factors of production

Imperfect Competition refers to conditions which are quite opposite of those that prevail under perfect competition. For instance, (a) the number of dealers is not large, at any rate not as large as under perfect competition, (b) The products are not homogeneous; they are, on the other hand differentiated by means of different labels attached to them, such as different brands of toilet requisites, (c) Either in ignorance or on account of transport cost or lack of mobility of the factors of production, same price does not rule in the market throughout. Rather different prices are charged by different producers of products which are really similar but are made to appear different through advertisements, high-pressure salesmanship and labeling and branding. The result is that each producer comes to have a hold on a clientele from whom he can charge higher prices.

In the case of imperfect competition, the demand curve or sales curve, or what is also called average revenue curve, is not a horizontal straight line. It is, on the other hand, a downward sloping curve, i.e., the seller can sell more by reducing price, while under perfect competition, he need not reduce the price for he can sell any amount at the prevailing price. The producer, under imperfect competition, can charge higher prices, because his customers are attached to him. He can thus have a price policy of his own and ran significantly influence total supply. On the other hand, a seller under perfect competition has no price policy and has merely to accept the market price. The demand for the product of a producer under imperfect competition is not perfectly elastic. In fact, the above-mentioned factors make competition imperfect and differentiate imperfect competition from perfect competition.

It may, however, be added that imperfect competition is a blend of monopoly and competition. In the real world, we have neither monopoly (i.e., absence of competition) nor competition but imperfect competition, i.e., partly monopoly and' partly competition. The products are not complete substitutes for one another but they are close substitutes.

Imperfect competition is a wide term and includes different market situations which are called monopolistic competition, oligopoly and ordinary monopoly. In order to understand imperfect competition better we must explain these types of imperfect competition in a little detail.

Monopolistic Competition is a particular form of imperfect competition and its characteristics are: (a) many sellers, (b) differentiated products and (c) capacity of the seller to vary prices. The products are not homogeneous but they a.re close substitutes and their cross elasticity is adequate but not unlimited, e.g. ready-made clothes, tooth pastes, hair oil, fountain pens, etc.

Ordinary Monopoly-In monopoly, a single producer or seller controls the supply and he can fix the price. He is the firm and he also comprises the industry. Thus, in monopoly the dissimilarity involving the firm and the industry disappears.

The average revenue curve or the demand curve always slopes-downwards to the right as in monopolistic competitions it is less elastic in monopoly than in monopolistic competition. In monopoly, there is one seller and in monopolistic competition many sellers. There is no need to differentiate product because no close substitutes are available. It is one product homogeneous and completely under the control of the monopolist.

Oligopoly- The word 'olig' in Greek means 'a few' and 'poly' means to sell. Thus, oligopoly is a market form in which there are only a few, say three, four, five, sellers of a commodity. The commodity which these few sellers produce and sell may be homogeneous (e.g., cement) or it may be differentiated (like motor cars). The former is called a perfect 'oligopoly' or 'oligopoly without product-differentiation' and the latter is called 'Imperfect oligopoly' or "oligopo¬ly with product-differentiation".

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