If a firm in a perfectly competitive market is a price taker, what is the firm in a monopolistic market called?

Let’s start by defining perfect competition and monopoly. A market in perfect competition assumes that all firms are selling identical products, with a relatively small market share, and the firms cannot control the market price of their goods. Additionally, the industry has free entry and exit – meaning a firm can easily enter or leave the market (no high startup costs, etc.). In this circumstance, the price of a firm’s goods is set by market...

Let’s start by defining perfect competition and monopoly. A market in perfect competition assumes that all firms are selling identical products, with a relatively small market share, and the firms cannot control the market price of their goods. Additionally, the industry has free entry and exit – meaning a firm can easily enter or leave the market (no high startup costs, etc.). In this circumstance, the price of a firm’s goods is set by market forces. If consumers demand x quantity of Good A, then the price will be at Price A. If consumers demand less of a good, the price will drop to Price B, and if they demand more, the price will rise to Price C. In this situation, firms are “price takers” – the price of their goods is determined by the market.

A monopolistic market, on the other hand, has high barriers to entry (it costs a lot to enter the market, there are high start up costs, etc.) and is dominated by a single firm who produces all the goods – as if Apple were the only producer of phones (no Windows, no Samsung). If the iPhone was the only phone on the market, Apple could charge however much they wanted for it and there would still be a high demand for the product because it was the only phone available. In this instance, the firm is a “price setter” – they set the price for their goods and the market follows.