Multiple Choice
Assume a decreasing-cost perfectly competitive industry. Which of the following statements is true?
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3. The Market Forces of Supply and Demand
Competitive Markets
Multiple Choice
Suppose a pie graph shows many firms each holding a small and roughly equal share of the total market. What kind of market structure does this graph illustrate?
A
Monopoly
B
Oligopoly
C
Perfect competition
D
Monopolistic competition
Verified step by step guidance1
Step 1: Understand the characteristics of different market structures. A monopoly has one firm dominating the market, an oligopoly has a few firms with significant market shares, monopolistic competition has many firms with differentiated products, and perfect competition has many firms each with a small, roughly equal market share.
Step 2: Analyze the pie graph description: many firms each holding a small and roughly equal share of the total market. This implies no single firm has significant market power.
Step 3: Recall that perfect competition is characterized by many firms, identical or very similar products, and firms being price takers due to their small market share.
Step 4: Compare the given description to the characteristics of perfect competition and other market structures to identify the best match.
Step 5: Conclude that the market structure illustrated by the pie graph is perfect competition because it fits the description of many small firms with equal market shares.
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