State with reasons whether you agree or disagree : Perfect competition means monopolistic competition.

Answer: Disagree.

Perfect competition and monopolistic competition are two different forms of market:

• Under perfect competition there are a very large number of sellers selling a homogeneous product; under monopolistic competition there are a large number of sellers selling differentiated products (brands).
• A perfectly competitive firm is a price-taker; price is fixed by the industry. A firm under monopolistic competition has some control over the price of its own brand.
• There are no selling costs under perfect competition, while selling costs (advertisement) are an essential feature of monopolistic competition.
• The demand (AR) curve of a perfectly competitive firm is horizontal (perfectly elastic); under monopolistic competition it slopes downward and is relatively elastic.
• Perfect competition assumes perfect knowledge and perfect mobility; monopolistic competition is the more realistic market seen in practice (soaps, toothpaste, cosmetics).

Hence perfect competition does not mean monopolistic competition.