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Distinguish between the main features of perfect competition and monopoly market structure

There are three main features that distinguish between a perfect competition and monopoly market structure: the type of firm, the freedom of entry and the nature of the product (Sloman and Norris 1999, pg, 161). A table of these features is contained in Appendix A. These two market structures are on opposite ends of the scale and consequently, the features and benefits of each structure vary quite dramatically.FirmsIn a perfectly competitive market structure, there must be many firms in the market competing for business. In contrast to this, within a monopoly there is only one firm operating in the market. A firm that is operating within a perfect market is referred to as a price taker. Duffy (1993, pg. 107) explains that a condition of working within a perfectly competitive market is that a price taker cannot control the price of the goods it sells; it simply takes the market price as given. In a monopoly, the firm does not have to take the given price. It is able to search the market for the best price to charge relative to the demand for the product, profitability and availability of the resources for manufacture. This is particularly relevant when there is a shortage of supply. As there is only one seller of the product, consumers are forced to purchase the goods at a higher price. The International Encyclopedia of Economics (1997, pg. 1041) states, that the monopolist can unilaterally dictate the quantity, quality, and price of the good or service it provides. This is in direct contrast to the fixed pricing structure of firms within a perfect competition market structure. Entry RestrictionsMany variables can restrict entry to a market. There may be government regulations, patents, import/export restrictions or large investment and start up costs. It is the number of restrictions in place that determines the difference between the two markets. There is no restriction on entering a perfect competition market. Sloman a...

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