Question

With the aim of graphs differentiate between the perfect competition and monopoly in the short run

Answer 1

The monopoly will make profits in excess of those merely neces­sary to keep in business, and no pressure exists for price to fall and reduce these. Under monopoly, prices are higher and output lower than they would be under Perfect Competition. The power of the monopolist derives from the fact that demand for his product is not perfectly elastic, so that when price rises, sales largely hold up.

This is not so for a perfect competitor, who will sell nothing if he raises his price even a fraction above the going rate. The degree of monopoly power a firm enjoys can be measured by how inelastic demand for its product is. The more inelastic demand is, the more the monopoly can raise its prices without losing sales.