1) Which market structure is characterized by a single firm selling the entire output of a...

1) Which market structure is characterized by a single firm selling the entire output of a product?

2) Which market structure is characterized by a large number of firms selling an identical product?

3) What are two important characteristics of a perfectly competitive market?

4) What is the relationship between MR and MC if a firm is selling more than the profit-maximizing output of a good?

5) What is the relationship between MR and MC if a firm is selling less than the profit-maximizing output of a good?

Expert Solution

1.Ans: The market structure characterized by a single firm selling the entire output of a product is known as Monopoly market.

2.Ans: The market structure characterized by a large number of firms selling an identical product is known as Perfectly competitive market.

3.Ans: Important characteristics of a perfectly competitive market are ;

There are large number of buyers and sellers.
Firms are selling homogeneous product.
Industry is the price maker whereas firm is the price taker.
Free entry an exit of firms

4.Ans: If a firm is selling more than the profit-maximizing output of a good then MC will be greater than MR ( MC > MR ) . The firm can make higher profits by reducing its quantity of output.

5.Ans: If a firm is selling less than the profit-maximizing output of a good then MC will be less than MR ( MC < MR ) . The firm can make higher profits by expanding its quantity of output.

Explanation:

The profit maximization condition is where marginal revenue equals marginal cost ( MR = MC).

Rahul Sunny answered 2 years ago

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