Main differences between perfect competition and monopoly market structures - Essay Example

The sellers have the aim to provide the products and services as per the highest quality standards and at a minimum price as compared to the competitors. Since all the sellers have the same objective, it creates the scenario of perfect competition where the buyers have the highest bargaining power (McNulty, 1967). In a perfectly competitive market, it is very difficult to choose between the products and services sold in the market. The firms tend to maximize profits under the strict conditions of a perfectly competitive market where the buyers and the sellers are aware of all the information of the market.

The barriers to entry and exit from the market is very less. The returns to the investments do not have large scope of enhancement in future (Marshall, 2006). The monopoly market structure resembles the form of market where a certain product or services is manufactured or supplied by a single firm. The monopoly market signifies minimal competition among the firms operating in the market. The buyers also have practically no options to avail substitute products and services. In a monopoly market structure, the business is the price setter and has the ability to charge high prices (Mankiw, 2011).

The customers in a monopoly market has the lowest bargaining power as there is no availability of substitute products and services.The government encourage monopoly in certain sectors in order to provide economic benefits to the people by reduction of the market risk. The barriers to entry into the monopoly market is very high. In a monopoly market, it is observed that only one firm tends to dominate the market supply. The price discrimination is observed as characteristics of the monopoly market as the sellers vary the price of the products in comparison to the quantity of the products (Hall and Lieberman, 2009).

In several jurisdiction, the monopoly form of market structure is prohibited in