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6 marksMarket Structure

CAPE Economics Unit 1 · 2006 · Paper 2 · Question 3(e)(ii)

In a perfectly competitive industry, firms are making positive economic profit (above normal profit).

Explain what will happen to profit, the number of firms, and output in the long run.

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Other parts of this question

  1. 3(a)Define the term 'market structure'.[2 marks]
  2. 3(b)State four assumptions on which perfect competition is based.[8 marks]
  3. 3(c)(i)State three types of market structures other than perfect competition, and give an example of each.[6 marks]
  4. 3(c)(ii)Explain how each of the types mentioned in (c)(i) differs from perfect competition.[6 marks]
  5. 3(d)An industry's long-run average cost is falling even after demand is met. Describe the type of market structure that this industry is likely to represent.[6 marks]
  6. 3(e)(i)Draw a diagram showing this situation. Label the axes, the cost and revenue curves, and indicate the profit made by firms.[16 marks]

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