This paper addresses the concern that monopolies arise naturally out of the free market. An attempt is made to compare and contrast two theories of monopoly economic and political monopoly that this is not true. This paper further demonstrates that the two theories of monopoly have their separate roots in two opposite theories of competition: perfect competition and competition as rivalry. Hence the paper discusses only one of these theories of competition accurately describes the nature of competition in an economy. Besides, the paper also delves the two theories of competition and monopolies are derived from collectivist and individualist political philosophy. It illustrates how perfect competition and economic monopoly have undermined economists' understanding of the actual nature of both competition and monopoly. After investigating these theories, an attempt to made to apply them to show how one can come to very different conclusions about when monopoly power does and does not exist. 1. INTRODUCTION Ravinder Rena College of Arts and Social Sciences Eritrea Institute of Technology Gobind M. Herani Indus Institute of Higher Education (IIHE) * ABSTRACT Journal of Management and Social Sciences Vol. 3, No. 1, (Spring 2007) 11-21 The material presented by the author does not necessarily portray the viewpoint of the editors and the management of the Institute of Business & Technology (BIZTEK) or Indus Institute of Higher Education (IIHE) JMSS is published by the Institute of Business and Technology (BIZTEK). Main Ibrahim Hydri Road, Korangi Creek, Karachi-75190, Pakistan. * Ravinder Rena : ravinder_rena@Yahoo.com, drravinderrena@gmail.com Dr. Gobind: drgobind@hotmailcom * C Applicability of the Theories of Monopoly and Perfect Competition -Some Implications It is often claimed that a free market leads to large firms gaining monopoly power and being able to restrict the output of the goods they produce to raise their prices (James, et al., 2000: 126-127). This alleged monopoly power is said to lead to greater economic inefficiency, a lower productive capability, and a lower average standard of living. Hence, it is said the government must step in to restore competition. In this paper, an attempt is made to show this claim is based on an invalid view of competition and monopoly. The free market allows for the maximum amount of competition that is possible in any industry and that deviating from a free market, with some form of government intervention in the name of allegedly increasing competition, actually decreases the intensity of competition that exists in the economy and thus decreases the level of economic efficiency, the productive capability, and the standard of living (Arnold. Roger A., 2001). An attempt is made in this paper to compare and contrast two theories of monopoly perfect competition. This paper further demonstrates that the two theories of monopoly have their separate roots in two opposite theories of competition: perfect competition and competition Keywords : Monopoly, Perfect Competition, firm, industry, government, egalitarianism, etc. * *