There are some similarities between a monopoly firm and a monopolistic competitor firm in that they can both raise their price without losing all their customers and this is shown by the fact that they both have negatively sloped demand curves. They are also similar in that they will attempt to maximise their profits by equating their marginal costs to their marginal revenue.

There are significant differences between the market structures of monopolistic competition and monopoly. With monopolistic competition there are many competing firms whereas with monopoly there is only one firm. Under monopolistic competition each firm sells a differentiated product whereas a monopoly may sell either a single product or a range of differentiated but similar products.

A crucial difference between the two structures is that with monopolistic competition there are no barriers to entry whereas with monopoly there are barriers to entry. The absence of barriers to entry means that firms in a monopolistic competition industry will only make normal profits in the long run although super normal profits can be made in the short run. With monopoly, the existence of barriers to entry means that in both the short and the long run excess profits can be made.

Although both monopolistic and monopoly firms face downward sloping demand curves, the market demand curve is the demand curve for a monopolist whereas a monopolistic competitor firm only has a small share of the market.

Both firms can be profit maximisers, however, competition means that a firm in a monopolistic competitition market structure will have to seek to minimise its costs whereas a monopoly firm can afford to some extent to be inefficient. Monopoly firms will be better able to exploit economies of scale as their production runs will be bigger than monopolistic competitor firms.

For consumers there are likely to be some significantly different welfare effects; the variety of products offered is likely to be better under monopolistic competition since there are many competing firms trying to differentiate themselves. Also, competition will help to keep prices down and the lack of barriers to entry will ensure product innovation as new firms can quickly enter the market.

A monopoly market structure is generally likely to lead to less innovation due to lack of competition although the possibility of supernormal profits will perhaps allow the monopoly to invest in new risky ventures that might not be possible in monopolistic competition where firms are restricted to only normal profits in the long run.

There is a possibility that prices facing consumers will be lower under monopoly, however, due to the fact that the monopolist can exploit economies of scale. Against this it might be possible for a monopolist to price discriminate between its customers which will not be possible under monopolistic competition. If price discrimination is practised by a monopolist, it will be to the detriment of consumers and benefit of the monopolist as the latter would gain some of the consumer surplus.

For differences key points are: demand facing monopolist is likely to be relatively inelastic compared to monopolistic competition and the market demand curve is its demand curve which is not the case for monopolistic competition, barriers to entry for monopoly but none for monopolistic competition mean potential for excess profits for monopoly while only normal profits for monopolistic competition, monopoly more likely to benefit from economies of scale in production, price discrimination is much easier for a monopolist, while both may seek to maximise profits in the real world a monopoly firm can survive without necessarily minimising its average costs of production.

For consumer advantages and disadvantages the key points are: monopolistic competition gives greater product variety, also it provides greater price competition and less chance for price discrimination, but monopolies may do better on R&D due to excess profits, monopolies may benefit consumers if economies of scale lead to lower prices.