What are the different assumptions of a perfectly competitive market and a market with monopolistic competition?
The main characteristics of a perfectly competitive market include: (1) a very large number of small, price-taking firm; (2) a homogenous product is being sold; (3) there are no barriers to entry or exit; and (4) there is perfect knowledge of information.
On the other hand, the main assumptions of a market with monopolistic competition are: (1) there is a large number of small firms who have relatively free entry and exit into the market; and (2) there is product differentiation, as in there are physical/quality differences, location, services, and product image which could be differentiated between firms.
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