Suppose a pie graph shows many firms each holding a small and roughly equal share of the total market. What kind of market structure does this graph illustrate?

• A. Monopoly
• B. Oligopoly
• C. Perfect competition
• D. Monopolistic competition

Answer: (C)

Verified step by step guidance

1. Step 1: Understand the characteristics of different market structures. A monopoly has one firm dominating the market, an oligopoly has a few firms with significant market shares, monopolistic competition has many firms with differentiated products, and perfect competition has many firms each with a small, roughly equal market share.
2. Step 2: Analyze the pie graph description: many firms each holding a small and roughly equal share of the total market. This implies no single firm has significant market power.
3. Step 3: Recall that perfect competition is characterized by many firms, identical or very similar products, and firms being price takers due to their small market share.
4. Step 4: Compare the given description to the characteristics of perfect competition and other market structures to identify the best match.
5. Step 5: Conclude that the market structure illustrated by the pie graph is perfect competition because it fits the description of many small firms with equal market shares.