The table below shows the payoff (profit) matrix of Firm A and Firm B indicating the profit outcome that corresponds to each firm's pricing strategy (where $500 and $200 are the pricing strategies of two firms).Table 12.2

-The market structure in which the largest quantity of output is sold at the minimum possible price is:
A)monopoly.
B)perfect competition.
C)oligopoly.
D)monopolistic competition.
E)monopsony.

Question

The table below shows the payoff (profit) matrix of Firm A and Firm B indicating the profit outcome that corresponds to each firm's pricing strategy (where $500 and $200 are the pricing strategies of two firms).Table 12.2
 
-The market structure in which the largest quantity of output is sold at the minimum possible price is:
A)monopoly. 
B)perfect competition. 
C)oligopoly. 
D)monopolistic competition. 
E)monopsony.

Quizplus · Accepted Answer

In perfect competition, firms are price-takers and the market price is determined by the intersection of supply and demand. Therefore, the largest quantity of output is sold at the minimum possible price. This is reflected in the payoff matrix where both firms have the highest profit when they choose the lower pricing strategy, resulting in a lower market price and higher quantity sold.

The Table Below Shows the Payoff (Profit) Matrix of Firm