Perfect Competition:
In a perfect competition, there are a large number of producers as well as buyers. Nobody controls the price of the products and most companies will sell their products at the same price and try to offer the lowest in order to attract more consumers. In monopoly, majority of the market is controlled by one firm, having over 40% of the market share. The bigger monopoly a company bas, the more they will charge their product at higher prices.
Pricing and output policies in a perfect competition is partly more favorable to consumers due to some factors. They are such as firms as the price takers, this means that the firms themselves that control the price of their products which may change any time. Another benefit would be lower selling price due to competition, consumers will therefore able to obtain their goods and services at low price.
There are several reasons for discouraging monopolies, these include restriction of supply and raises revenue, makes excessive profits, inefficiency, less varieties of goods and services, restricts new ideas, limits new products, etc. In most monopolies, the price is set above marginal cost and the firm earns a positive economic profit. The price of a good is higher and the quantity is lower, which is economically efficient. It is therefore, governments often seek to regulate monopolies and encourage more competition.
Perfect competition is also responsive to consumer wishes such as changes in demand which leads to extra supply. Unlike monopoly, which may find it difficult to respond to consumers’ demand and request towards their product. An example of perfect competition would be McDonald and KFC, both are fast food restaurants that are competing against consumers so they try to charge prices as low as possible in the hope of more consumers to maximize profits and boost income.
Monopoly:
Monopoly also has several advantages to both consumers or economically. Monopoly reduces wastage of resources, it usually uses modern technology in most of the processes. It also enjoys economies of scale as it is the only supplier in the market and that benefit can be passed on to the consumers. The large amount of profits made by monopolies, it can be used for research and development in maintaining their status as a monopoly. Monopolies may also use price discrimination which could benefit the economically weaker sections of the society, such as through discounts or beneficial offers. Also, it can afford to invest in the latest technology and machinery to be more efficient and avoid competition. An example of monopoly would be Apple which is charging its product very high compared to Samsung that are offering range of products from the cheapest to the most expensive. This is because Apple has more durable and advanced applications in their smart phones.
In conclusion, monopoly and perfect competition both have similarities and differences between firms in both sides. Both have the same objective which is to maximize profits. However, monopolies are generally considered having more disadvantages than perfect competition. Although perfect competition gives relatively more favorable pricing and output policies towards the consumers, there are also disadvantages of this matter. So each of them has their own advantages and disadvantages.
References:
https://www.boundless.com/economics/monopoly/monopoly-production-and-pricing-decisions-and-profit-outcome/market-differences-between-monopoly-and-perfect-competition/
http://wiki.answers.com/Q/Advantages_and_disadvantages_of_Perfect_competition_market_structure?#slide=5
http://www.economaldives.net/2012/03/17-pricing-and-output-policies-in.html
http://www.dineshbakshi.com/igcse-gcse-economics/private-firm-as-producer-and-employer/revision-notes/1306-monopoly