If a firm in which market structure has zero costs or only fixed cost, the equilibrium quantity supplied is determined at the point where marginal revenue becomes zero?

Introduction / Context:
This question combines the idea of cost structure with the condition for profit maximisation in different market forms. In general, firms choose output where marginal revenue equals marginal cost. However, if marginal cost is zero because there are no variable costs, the special case requires attention to where marginal revenue itself becomes zero. This reasoning is most straightforward in the context of a monopoly.

Given Data / Assumptions:

• The firm has zero costs or only fixed costs, so marginal cost is effectively zero.
• The firm faces a downward sloping demand curve, so marginal revenue declines as quantity increases.
• We consider different market structures: perfect competition, monopoly, oligopoly and monopolistic competition.
• The question asks which structure fits the description that equilibrium quantity is determined where marginal revenue becomes zero.

Concept / Approach:
In monopoly, the firm is the sole seller and faces the entire market demand curve. It chooses output by setting marginal revenue equal to marginal cost. If marginal cost is zero, the profit maximising condition becomes marginal revenue equal to zero. At that quantity, any further increase in output would reduce total revenue while cost remains zero, so profit starts to fall. In perfect competition, each firm takes price as given and marginal revenue equals price, and zero marginal cost would lead to unbounded output in theory if there are no capacity limits. Therefore the special case described in the question fits a monopoly with zero marginal cost.

Step-by-Step Solution:
1. Start from the general rule for profit maximisation: choose output where marginal revenue equals marginal cost. 2. In this question, marginal cost is zero because costs are either zero or only fixed costs with no variable component. 3. The condition becomes marginal revenue equal to zero for the profit maximising quantity. 4. A monopoly faces a downward sloping demand curve, so marginal revenue declines and eventually becomes zero at a certain quantity. 5. At that point, total revenue is at a maximum, and with zero marginal cost, profit is also maximised, so a monopolist will choose this quantity.

Verification / Alternative check:
Draw a simple linear demand curve with corresponding marginal revenue. If cost is zero, profit equals total revenue. Total revenue is maximised where marginal revenue is zero. Therefore the monopolist chooses that quantity. In contrast, under perfect competition, price equals marginal revenue which is constant for each firm. With zero marginal cost and no capacity limits, a competitive firm would try to expand output indefinitely, which is unrealistic and not the scenario described by the question.

Why Other Options Are Wrong:
Option A: In perfect competition, marginal revenue equals price, and with zero marginal cost, profit increases as long as more units can be sold at the given price, so marginal revenue does not go to zero in the same sense.
Option C and D: In oligopoly and monopolistic competition, the analysis of marginal revenue exists, but the question uses a standard textbook reasoning most clearly applied to monopoly where a single firm faces all demand.
Option E: Bilateral monopoly involves one buyer and one seller and is not the usual context for the simple marginal revenue equal to zero condition with zero marginal cost.

Common Pitfalls:
A typical confusion is to forget that marginal cost is zero and still try to set marginal revenue equal to a positive marginal cost. Another mistake is to think that the logic of marginal revenue equal to zero for total revenue maximisation only applies to revenue and not profit, but when costs are zero, revenue and profit maxima occur at the same point. Always carefully read the cost conditions given in the question before applying standard rules.

Final Answer:
Monopoly