#1
Which of the following is true regarding a perfectly competitive market?
There are many buyers and many sellers
ExplanationPerfectly competitive markets have numerous buyers and sellers.
#2
What does the term 'MR' stand for in perfectly competitive markets?
Marginal Revenue
ExplanationMR stands for Marginal Revenue in perfectly competitive markets.
#3
Which of the following is a characteristic of a perfectly competitive market structure?
Price taker behavior
ExplanationPerfectly competitive firms are price takers, meaning they accept the market price.
#4
What is the shape of the demand curve faced by a perfectly competitive firm?
Horizontal
ExplanationThe demand curve faced by perfectly competitive firms is horizontal.
#5
What is the characteristic feature of a perfectly competitive market regarding entry and exit?
Low barriers to entry and exit
ExplanationPerfectly competitive markets have low barriers to entry and exit.
#6
What is the shape of the average revenue (AR) curve for a perfectly competitive firm?
Horizontal
ExplanationThe average revenue curve for perfectly competitive firms is horizontal.
#7
In perfectly competitive markets, what is the condition for profit maximization?
MR = MC
ExplanationProfit maximization occurs when Marginal Revenue equals Marginal Cost.
#8
What happens to a perfectly competitive firm's economic profit in the long run?
It decreases to zero
ExplanationEconomic profit decreases to zero for perfectly competitive firms in the long run.
#9
What is the short-run supply curve of a perfectly competitive firm?
The marginal revenue curve above the average variable cost curve
ExplanationShort-run supply curve is the marginal revenue curve above the average variable cost curve for perfectly competitive firms.
#10
In a perfectly competitive market, how does an increase in demand affect equilibrium price and quantity?
Price increases and quantity increases
ExplanationAn increase in demand in perfectly competitive markets leads to both higher price and quantity.
#11
What is the relationship between marginal cost (MC) and average total cost (ATC) in the short run for a perfectly competitive firm?
MC < ATC
ExplanationIn the short run, marginal cost is less than average total cost for perfectly competitive firms.
#12
What is the relationship between marginal revenue (MR) and price (P) for a perfectly competitive firm?
MR = P
ExplanationIn perfectly competitive markets, marginal revenue equals the market price.
#13
Which of the following is NOT a characteristic of perfectly competitive markets?
Price setting by individual firms
ExplanationIndividual firms in perfectly competitive markets do not set prices; they are price takers.
#14
What is the long-run equilibrium condition for a perfectly competitive firm?
P = MC = AC
ExplanationLong-run equilibrium for perfectly competitive firms occurs when price equals both marginal cost and average total cost.
#15
Which of the following is true about long-run equilibrium in a perfectly competitive market?
Firms produce at the minimum of the average total cost curve
ExplanationIn long-run equilibrium, perfectly competitive firms produce at the minimum of the average total cost curve.
#16
What is the long-run supply curve of a perfectly competitive industry?
Horizontal at the minimum average cost
ExplanationLong-run supply curve for perfectly competitive industries is horizontal at the minimum average cost.