What are the similarities and differences between the industrial organizations of perfect competition and monopoly? What are the different assumptions about them and the different conclusions reached about pricing, production, and profits due to those different assumptions?

Perfect Competition and Monopoly

The industrial organization in perfectly competitive markets is where there is a large number of industrial organizations (sellers) resulting in the free entry and exit of companies, producing the same products, and selling prices. Industrial monopoly organizations enjoy a non-competitive environment in which there is only one supplier on the market to describe the price of their goods. Commercially, a monopoly exists where one firm enjoys economies of scale producing high amounts of goods at a lower or lower cost than other firms, thereby creating a barrier to market entry.

The assumptions between an industrial organisation in a perfectly competitive market and those in a monopolized market are that those in a perfectly competitive market are price makers and that they are free to enter and exit the market. Those in the monopolized market are price discriminators and there is a barrier to market entry. On the basis of these assumptions, industrial organizations in a perfectly competitive market make price, production, and profit decisions through marketing research and development, including market price consideration. As a result, their prices are within the market rate. This concerns the cost of production and the expected profit that is dictated by the price of the product. Therefore, they are considered to be price-takers. The industrial organisation in the monopolized market is a price discriminator due to its market dominance and lack of competition. Prices are therefore based on their cost of production and expected profit, and this is important by enjoying economies of scale.