1. Comparison of Market Structures

2. Long-run Equilibrium
In the long-run, only monopolists can earn supernormal profits because they have significant barriers to entry.
Monopolistic competitors and Pure competitors will achieve only normal profits in the long-run.
Profits will be competed away by new entrants and attrition reduces losses over the long-run

3. Efficiency
Pure competition is the only market structure that achieves both productive and allocative efficiency in the long-run.
Productive Efficiency: the production of a good in the least costly way (P = Min ATC)
Allocative Efficiency: the mix of goods and services produced is the most highly valued by society (P = MC or MB = MC)

4. Monopolistic competition and monopoly achieve neither allocative nor productive efficiency
P > MC (Allocative inefficiency)
P > Min ATC (Productive inefficiency)
Both market structures lead to a welfare loss for society

5. Monopolistic producers gain at the expense of consumers
Consumer surplus shrinks from A to V in the monopoly
Producer surplus expands from B under perfect competition to W+Y under the monopoly
Triangle X represents the welfare loss to the consumer and Z the welfare loss to the producer (loss of surplus for producers)

6. Production under monopoly benefits the welfare of a single producer
This comes at the expense of,
Consumers who pay a higher price and receive a lower equilibrium quantity
Other producers that would otherwise exist in a more competitive market
The monopolization of a particular industry may result in a loss of the incentives that make markets efficient
Lack of innovation: monopoly firms are unlikely to innovate to improve product quality or to reduce costs
Incentive to avoid competition: monopolies may choose to preserve their market share by using aggressive tactics or lobbying

7. Product Diversity and Innovation
The main advantage of monopolistic competition is product differentiation
This provides consumers with a wider range of choices than perfectly competitive firms
There are also several advantages of monopoly,
Economies of scale: cost-savings of economies of scale are more likely under a monopoly
Monopolistic competitors are unlikely to grow large enough to see these benefits
In some cases, high fixed costs of production mean that lower costs can only be achieved through massive runs of output

8. Research and Development: while a monopolist has little incentive to invest in R & D it has a greater capacity to do so because of its long-run profits
These firms may yield even greater profits with new products and services
They may be able to entrench their position with even more significant barriers to entry

9. Summary of Market Structures
Market Model
Characteristic
Pure Competition
Monopolistic Competition
Oligopoly
Pure Monopoly
Demand curve
Horizontal
Downward-sloping
Kinked
Marginal revenue curve
Discontinuous
Output rule
MR = MC
Price in the short-run
P = MC
P > or < or = AC
P > MC
P > or < or = AC
Profit in the short-run
+/ - / 0
Price in the long-run
P = AC
P > or = AC
Profit in the long-run
(Normal Profit)
+/0 +
(Supernormal)