Question

Match the industry structure to the description.

-       A.       B.       C.       D.    Price = Marginal Cost = Marginal Revenue = Average Total Cost, and Profit = 0       -       A.       B.       C.       D.    Many, many firms, all of which must charge the given market price       -       A.       B.       C.       D.    Demand is perfectly elastic       -       A.       B.       C.       D.    Firms in this structue could be restaraunts, which are differentiated by cuisine, location, dress code; etc.       -       A.       B.       C.       D.    If a firm is making a profit, such that price is greater than average total cost, more firms will enter the market.       -       A.       B.       C.       D.    If firms collude, they act like a monopoly.       -       A.       B.       C.       D.    One firm sells the product.       -       A.       B.       C.       D.    Benefits consumers the most       -       A.       B.       C.       D.    Benefits firms the most       -       A.       B.       C.       D.    Demand curve is kinked

A. Monopolistic Competition B. Oligopoly C. Monopoly D. Perfect Competition

Answer 1

1> Price = Marginal Cost = Marginal Revenue = Average Total Cost, and Profit = 0

Perfect competition

2> Many, many firms, all of which must charge the given market price

Perfect Competition

3> Demand is perfectly elastic

Perfect Competition

4> Firms in this structue could be restaraunts, which are differentiated by cuisine, location, dress code; etc.

Monopolistic Competition

5> If a firm is making a profit, such that price is greater than average total cost, more firms will enter the market.

Perfect Competition

6> If firms collude, they act like a monopoly.

Oligopoly

7> One firm sells the product.

Monopoly

8> Benefits consumers the most

Perfect Competition

9> Benefits firms the most

Monopoly

10> Demand curve is kinked

Oligopoly

Reason

In a perfect competition, firms compete, there are no barriers to entry or exit, they have identical product and firms do not have profit in the long run maximizing total surplus. Monopolistic competition is same as perfect competition except each has little differentiated product, thus have some market power. Oligipoly is some big firms dominating the market and monopoly is one firm dominance which leads to maximum producer surplus.