Final answer:
In a monopoly market, a single firm has complete control over the market and can charge a price above the average cost to earn supernormal profits. In a monopolistic competitive market, where there are multiple firms with some control over price, the supernormal profits are lower.
Step-by-step explanation:
Monopoly Market
In a monopoly market, a single firm has complete control over the market and there are no close substitutes for its product. This allows the monopoly to charge a price above the average cost and earn supernormal profits. The supernormal profits can be illustrated graphically by showing the monopolist's perceived demand curve, marginal cost curve, and average cost curve. The difference between the total revenue and total cost represents the supernormal profit, which is shown as the darkly shaded box in the graph.
Monopolistic Competitive Market
In a monopolistic competitive market, there are multiple firms that offer similar but slightly differentiated products. Each firm has some control over the price it charges, but faces some competition. As a result, the profits in this market are lower compared to monopoly. The supernormal profit can be illustrated graphically by showing the firm's perceived demand curve, marginal cost curve, and average cost curve. The difference between the total revenue and total cost represents the supernormal profit, but it is smaller compared to monopoly.