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in Economics by (63.7k points)

Differentiate between Perfect competition and monopolistic competition.

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Perfect Competition :

(a) Infinitely large number of firms

(b) Homogeneous products

(c) Firms have no control over price.

(d) Demand is infinitely elastic.

(e) Demand curve (AR) is a straight line parallel to horizontal axis shown below.

(f) P = MC at equilibrium point.

(g) No selling costs incurred 

(h) Price is lower than the price in monopolistic competition.

(i) AR = MR

Monopolistic competition:

(a) A large numbers of firms

(b) Differentiated products 

(c) Firms have some control over price.

(d) Demand is more elastic.

(e) Demand curve is a flatter downward showing greater elasticity.

(f) P>MC at equilibrium point.

(g) Selling costs are important features in this competition.

(h) Price is higher than competitive price due to the monopoly element.

(i) AR > MR or MR < AR

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