MonopolyA monopoly implies an exclusive possession of a market by a supplier of a product or a service for which there is no substitute.
In this situation the supplier is able to determine the price of the product without fear of competition from other sources or through substitute products. It is generally assumed that a monopolist will choose a price that maximizes profits.Monopolistic CompetitionMonopolistic competition is a common market structure where many competing producers sell products that are differentiated from one another (i.e. the products are substitutes, but are not exactly alike).
Examples of monopolistic completive markets are restaurants, CDs, clothing and shoes.Characteristics of monopolistic competitive markets:There are many producers and many consumers in a given market, and no business has total control over the market price. Consumers perceive that there are non-price differences among the competitors' products. There are few or zero barriers to entry and exit.Producers have a low degree of control over price.Differences between Monopoly and Monopolistic CompetitionMonopolyMonopolistic CompetitionSingle seller: In a monopoly, there is one seller of the good that produces all the output.
Large number of small firms.Maximum Profits.Low Profits.Price Maker: Decides the price of the good or product to be sold, but does so by determining the quantity in order to demand the price desired by the firm. Price is mostly monopolized by consumer.High Barriers to Entry: Other sellers are unable to enter the market of the monopoly.
Due to costs or special expertise needed. Few or no entry and exit barriers.Price Discrimination: A monopolist can change the price and quality of the product. In monopolistic market producer can't sell at whatever prices they want, prices are monopolized by consumers and depends on competition, as every company tries to offer best prices to catch more customers.
