Suppose XYZ Corp.is a profit-maximizing firm that is producing and selling 1 billion disposable wooden chopsticks per month at a price of $0.04 per unit.Further,suppose market demand for this product is 1.5 billion units per month.What can we conclude about market structure in this case?
A)This is not a perfectly competitive market because XYZ Corp.is small relative to the size of the industry.
B)This is not a perfectly competitive market because XYZ Corp.is selling its product at a price that is not equal to marginal cost.
C)This is a perfectly competitive market because there is freedom of entry and exit in the industry.
D)This is a perfectly competitive market because the product is homogeneous.
E)This is not a perfectly competitive market because XYZ Corp.is large relative to the size of the industry.

Question

Quizplus · Accepted Answer

XYZ Corp. is producing 1 billion units out of a total market demand of 1.5 billion units, indicating it has a significant market share, which is inconsistent with a perfectly competitive market where firms are typically small relative to the market.