Which market conditions enable firms to earn higher profits?
Answer & explanation
Correct answer: option 4
The correct answer is Option (4) → Monopoly
The market situation is one of the factors that decide the profits, and so the goodwill, of a business. Under monopoly (or limited competition) a firm faces no rival who can take away its customers, so it can earn high profits.
Why the other options are incorrect
Option (1) Imperfect competition — Incorrect. There are still many competing sellers, so profits are kept in check by competition.
Option (2) Oligopoly — Incorrect. A few big rivals compete with each other, so a single firm cannot earn the profits a sole seller can.
Option (3) Perfect competition — Incorrect. With many sellers of the same product, firms earn only normal profits in the long run.
NCERT (2026-27 edition): |