Question

Explain any two similarities between a perfect market and a monopolistically competitive market.

State one similarity between monopolistic competition and perfect competition. 

State two similarities between the following:

Perfect competition and monopolistic competition.

Explain two similarities between a Perfect market and an Imperfect market.

Answer 1

Some characteristics of the perfectly competitive market are also present in the monopolistic competition. These characteristic are:

1. In both the markets, the number of buyers and sellers is large.
2. There are no restrictions on the entry into or exit of firms from the market.
3. In both the markets the principal goal of a firm is to maximize its profit.
4. Each firm earns only normal profit in the long run.