Under perfect competition, price determination is based on market forces of demand and supply where individual firms are price takers. A large number of buyers and sellers exist in the market, and the product is homogeneous. No single firm can influence the market price because each firm’s output is relatively small compared to total market supply. The equilibrium price is determined at the point where market demand equals market supply. Firms in perfect competition can sell any quantity at the prevailing market price, and their marginal revenue is equal to the price. In the long run, firms earn only normal profit because of free entry and exit of firms. If firms earn supernormal profit in the short run, new firms enter the market, increasing supply and reducing price until normal profit is restored. In contrast, under monopoly, there is only a single seller controlling the entire market supply of a product which has no close substitutes. The monopolist has greater control over price as well as output. However, unlike perfect competition, the monopolist cannot choose price and output simultaneously. The monopolist must either fix the price or the output level. The demand curve