The following figures show the demand and cost curves of a perfectly competitive firm and a monopoly respectively.Figure 11.7
D: Average Revenue
AC: Average cost
MC: Marginal cost
MR: Marginal cost
-Refer to Figure 11.7. If the perfectly competitive industry and the monopoly produces the same quantity, then:
A)there are 10 firms in the perfectly competitive industry.
B)there are 800 firms in the perfectly competitive industry.
C)there are 1,000 firms in the perfectly competitive industry.
D)there are 2,000 firms in the perfectly competitive industry.
E)there are 100 firms in the perfectly competitive industry.

Question

The following figures show the demand and cost curves of a perfectly competitive firm and a monopoly respectively.Figure 11.7
  D: Average Revenue
AC: Average cost
MC: Marginal cost
MR: Marginal cost
-Refer to Figure 11.7. If the perfectly competitive industry and the monopoly produces the same quantity, then:
A)there are 10 firms in the perfectly competitive industry. 
B)there are 800 firms in the perfectly competitive industry. 
C)there are 1,000 firms in the perfectly competitive industry. 
D)there are 2,000 firms in the perfectly competitive industry. 
E)there are 100 firms in the perfectly competitive industry.

Quizplus · Accepted Answer

Given that both the perfectly competitive industry and the monopoly produce the same quantity, the number of firms in the perfectly competitive industry can be determined by dividing the total market quantity by the quantity produced by a single firm in perfect competition. Without the specific figures from Figure 11.7, the correct answer relies on understanding market structures. In a perfectly competitive market, many firms contribute to the total market supply, leading to a high number of firms if the total quantity produced matches that of a monopolist, who is the sole producer. Therefore, the correct choice suggests a relatively high number of firms, indicating a significant fragmentation of the market typical of perfect competition.

The Following Figures Show the Demand and Cost Curves of a Perfectly