Question

1)

Which of the following market structures are found most often in an economy?

Group of answer choices

a Oligopoly and Monopoly

b Monopolistic Competition and Oligopoly

c Perfect Competition and Monopolistic Competition

d Perfect Competition and Monopoly

2)

In a perfectly competitive (price-taking) market, which of the following is false?

Group of answer choices

a The market price will equal marginal revenue

b As prices increase, each firm will be willing to produce more

c Firms will produce the quantity where marginal revenue equals marginal cost

d Firms will choose the price that maximizes their profit

Answer 1

Ans 1. B. Monopolistic and oligopoly - Perfect competition market form is the most rarest of the rare case as it is difficult for the sellers to maintain exactly same kind of goods in the market. Hence the little variations that arise in them lead to formation of a monopolistic form of market. Secondly, a single seller if exists in the whole of an economy can only be the Government usually otherwise the market form becomes an oligopoly with few sellers in the market selling almost similar branded luxurious goods.

Ans2. D. Firms in the perfect competition market are "Price takers" and not price makers. If the firms wish to raise their profits by increasing prices they will lose their demand. And if they reduce their prices to increase the demand then they would fall short of the supply as well as marginal revenue will be lower then marginal cost, leading to no profits. Therefore they take the price that is prevailing in the market.

Answer 2

ANSWER :

1.

Option b : Monopolistic competition and oligopoly.

Perfect competition an ideal situation which rarely exist. The next nearest form is monopolistic competition which usually is the case. Monopoly mens single firm in the market. It is also rare as usually few players do come in the scene for a particular field. Hence, monopolistic completion and oligopoly are found most often in an economy.

2.

Option d : Firms will choose the price that maximise the profit.

In perfectly competitive markets firms are price takes and can’t choose the price they desire. So, option d statement is false.