Knowledge checkpoint: Compare the characteristics of perfect competition and monopoly.
Perfect competition involves a large number of small firms, whereas a monopoly is characterised by one firm dominating the market.
In perfect competition, there are no barriers to entry and exit, but in a monopoly, there are high barriers to entry and exit.
Firms in perfect competition are price takers, while monopolies are price makers.
Perfect competition involves homogeneous products, whereas a monopoly offers a unique product.
The demand curve in perfect competition is perfectly elastic, while it is inelastic in a monopoly.
Firms in perfect competition make normal profits, whereas monopolies make abnormal profits.
Perfect competition achieves productive and allocative efficiency, whereas monopolies are productive and allocatively inefficient.
Lastly, perfect competition provides no opportunity for economies of scale, whereas monopolies can exploit economies of scale.