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Perfect competition:
  • In this the industry is the price maker and firm is the price taker.
  • Features such as (i) Existence of large number of buyers and sellers (ii) Free entry and free exit (iii) Homogenous / identical products (iv) Perfect knowledge about the market (v) Perfect mobility of the factors (vi) Absence of transportation cost. If all six features are being fulfilled, then it is known as perfect competition market and if only the first three features are being fulfilled then it is known as pure competition market.
  • A firm in perfect competition market is said to be in equilibrium when its MC=MR and MC curve should cut the MR curve from below.
  • A firm in the short run may face three different situations (i) Super normal profit, when AR > AC (ii) Loss, When AC > AR (iii) Normal profit, When AC=AR.
  • If a firm is unable to recover AVC in the short run, then it is known as shut down point.
  • It is an extreme form of imperfect competition with a single seller of a product which has no close substitute.
  • The word Monopoly is derived from two Greek words, Mono meaning single and Poly meaning seller.
  • In this type of market, there will be absence of competition, it is also known as single firm industry.
  • Seller will be price maker.
  • The short run equilibrium of the monopolist is at the point where MC = MR.
  • MC curve must cut MR curve from below to attain equilibrium in a monopoly market.
  • In the long run the supernormal profit will be continued because entry is restricted.
  • Price discrimination (Charging different price for different customers for the same commodity) exists.
Monopolistic Competition
  • In this market many producers produce goods which are close substitute of one another.
  • An individual firm in the long run is in equilibrium position when it produces a quantity lower
  • than its full capacity level. i.e., existence of excess capacity.
  • Product differentiation is an important feature of monopolistic market.
  • Free entry and free exist is another feature of this, in which firms can easily enter and exit.
  • It is blend of perfect competition and monopoly markets.
Oligopoly Competition:
  • It is also known as “Competition amongst few”.
  • Pure and differentiated Oligopoly, Open and Closed Oligopoly, Collusive and Competitive Oligopoly, Partial and Full Oligopoly, Syndicated and Organised Oligopoly are the different types of Oligopoly market.
  • The main features of Oligopoly market are interdependence, importance of advertisements, selling costs and group behaviour.
  • The sticky price is explained by the concept of Kinked Demand Curve.

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