Question

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Answer 1

Q6) The market structure that beenfits the firms the most is a monopoly. This is beacuse firms in this market setting have market power and they can set the prices to maximize their profits. The price is set according to MR =MC condition that maximizes the profit for the firms. This is not restriced to the short run as monopoly firms can make economic profits in the long run as well. Restrictions on the freedom of entry and exit make it possible. For instance, even firms in monopolistically competitive markets can make economic profits in the short run, but in the long run, more firms enter and the profit is driven to 0. If not monopoly (single producer), the second best option is to have an oligopoly structure where there are relatively few big firms and each has maret power. Long run profits are positive as entry is restricted. The worst market is the perfectly competitive, where there is no market power for the firm as it is a price taker and there is complete freedom of entry and exit.