ECONOMICS
COMPETITION AND MARKET STRUCTURES
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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Monopoly
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Oligopoly
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Monopolistic competition
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Perfect competition
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Detailed explanation-1: -In a perfectly competitive (PC) market there is zero interdependence because no firm is large enough to affect market price. All firms in a PC market are price takers, as current market selling price can be followed predictably to maximize short-term profits.
Detailed explanation-2: -Perfect competition is an ideal type of market structure where all producers and consumers have full and symmetric information and no transaction costs.
Detailed explanation-3: -Yes, all products appear the same which means price becomes a crucial factor in competition. In perfect competition, there are many firms selling homogenous products. Prices are driven down to the same level.
Detailed explanation-4: -In perfect competition, any profit-maximizing producer faces a market price equal to its marginal cost (P = MC). This implies that a factor’s price equals the factor’s marginal revenue product.