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Under which of the following market structures would the highest output of a particular good be produced?

Group of answer choices

a oligopoly
b monopolistic competition
c perfect competition
d monopoly

1 Answer

4 votes

Final answer:

The highest output of a particular good is produced under the market structure of perfect competition, where firms are price takers and produce where price equals marginal cost, resulting in efficient production levels.

Step-by-step explanation:

The question of which market structure would produce the highest output of a particular good relates to understanding different market organizations. When it comes to output levels, the perfect competition market structure tends to produce the highest output.

This is because firms in perfect competition are price takers and operate at the point where price equals marginal cost, leading to the production of goods at an efficient level. In contrast, a monopoly produces less output because the monopolist sets a higher price to maximize profits, thus reducing the quantity produced compared to perfect competition.

Oligopolies and monopolistic competitive firms have higher barriers to entry and can have significant control over their prices. However, they experience internal and external pressures that affect their output and pricing decisions, such as the temptation to collaborate and increase prices or to compete and expand output. In an oligopoly, firms might collude to act like a monopoly, resulting in lower output, whereas in monopolistic competition, firms are more likely to engage in non-price competition rather than expanding output.

In summary, under perfect competition, firms have no market power, leading to higher production output to meet the market demand at the equilibrium price. Under monopolistic competition, firms produce at a level where marginal cost equals marginal revenue, which is not the lowest point on the average cost curve, and leads to a higher average cost than perfect competition. Lastly, both oligopolies and monopolistic competition may involve product differentiation and advertising, which can affect output but not typically to the level of perfect competition.

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