There are few monopolies in the United States because the government limits them. The market could be a geographical area, such as a city or a regional area, and doesn’t necessarily have to be an entire country. In a monopoly, however, there’s only one seller in the market. In perfect competition, there are many small companies, none of which can control prices they simply accept the market price determined by supply and demand. In terms of the number of sellers and degree of competition, monopolies lie at the opposite end of the spectrum from perfect competition. Under monopolistic competition, therefore, companies have only limited control over price. Regardless of customer loyalty to a product, however, if its price goes too high, the seller will lose business to a competitor. At other times, perceived differences between products are promoted by advertising designed to convince consumers that one product is different from another-and better than it.

How is product differentiation accomplished? Sometimes, it’s simply geographical you probably buy gasoline at the station closest to your home regardless of the brand. Thus, if Coke has a big promotional sale at a supermarket chain, some Pepsi drinkers might switch (at least temporarily). But what if there was a substantial price difference between the two? In that case, buyers could be persuaded to switch from one to the other. Some people prefer Coke over Pepsi, even though the two products are quite similar. Products can be differentiated in a number of ways, including quality, style, convenience, location, and brand name. Instead, they sell differentiated products-products that differ somewhat, or are perceived to differ, even though they serve a similar purpose. Now, however, they don’t sell identical products. In monopolistic competition, we still have many sellers (as we had under perfect competition).

Pure monopoly examples