Question

In which of the market structures do multiple firms have little influence over product quantity?

A. monopsony

B. Perfect competition

C. Monopolistic competition

D. Competitively arranged

E. Monopoly

Answer 1

A Monopolistically competitive firm

Since a monopolistic firm is that form of market in which there is large number of buyers and sellers and firm sells differentiated product based on quality, size, shape etc, therefore product is not homogeneous. Since firm is price maker but firm does not compete on the price but they compete in the market based on size, quantity quality etc. In short-run a monopolistic competitive firm profit-maximizing condition is

MR=MC

Since in the oligopoly there are few firms who control whole markets, therefore in this market structure firms are dependent on the action of their rival firms.

There are many kinds of oligopoly firms

Cournot duopoly, Bertrand Duopoly and Stackelberg Duopoly, cartel. The aim of these kind of oligopoly is to maximize their profit.

Since the firm is perfectly competitive firm and profit-maximizing condition are

P=MC

There are large number of firms and buyers and there is free entry and exit. The firm is price taker and industry is price maker. So when more firms enter in the industry. Hence the supply increases and so the price decrease. Hence profit will also decrease.

A monopoly firm is a single seller because there is barriers to entry. In a pure monopoly industry there is a single firm.

A monopolist firm is a maker and profit-maximizing condition is

MR=MC

By describing the characteristics of monopoly, monopolistically competitive firm, perfectly competitive firms and oligopoly firm, it can be said that since in a monopoly market, there is only a single firm. Hence monopoly firm has a few interdependent firms.

Hence option first is the correct answer.

Since the perfectly inelastic supply curve is a vertical line and the perfectly inelastic demand curve is also a vertical line.

Hence both the perfectly inelastic demand and perfectly inelastic supply curve are parallel line.

Since there are large number of firms in the perfect competition and monopolistically competitive firm but only in perfect competition product is homogeneous. Hence number of firms does not affect the quantity in the industry.

Hence it can be said that in Perfect competition market structures do multiple firms have little influence over product quantity.

Hence option B is the correct answer.