Question

Suppose the price you are willing to pay for a new car is greater than the marginal cost of producing that new car. Under which market structure could you be most confident that you would be able to buy that new car?a) Perfect Compettitionb)Monopolistic competitionc)Oligopolyd)Monopoly

Answer 1

Answer:

The correct answer is letter "A": Perfect Competition.

Explanation:

Perfect Competition is a theoretical framework of the market, in which competition is as high as possible. In perfectly competitive markets, all firms sell an identical product, all firms are price takers, all firms have a relatively small market share, buyers have complete information about the product and prices, and the industry is characterized by low to no barriers to enter and exit a business. Perfect competitive markets do not exist in real life.

Thus, if the price a consumer is willing to pay for a product is greater than its marginal cost, that individual is likely in a perfectly competitive market.