#1
In perfect competition, firms are considered to be price takers because they:
Produce identical products.
ExplanationFirms have no control over prices due to identical products.
#2
Which of the following is a characteristic of a perfectly competitive market?
Low barriers to entry.
ExplanationEasy entry and exit for firms.
#3
What is the long-run equilibrium condition for a perfectly competitive firm?
Price equals marginal cost.
ExplanationMarket forces equate price and cost.
#4
In perfect competition, which of the following is NOT true?
Firms earn economic profits in the long run.
ExplanationEconomic profits are driven to zero.
#5
What is the characteristic feature of a perfectly competitive market in terms of product differentiation?
Products are identical.
ExplanationNo product differentiation.
#6
In perfect competition, what happens to the price when a firm increases its output?
Price decreases.
ExplanationLaw of supply and demand.
#7
What is the key characteristic of the short run for a perfectly competitive firm?
Some factors of production are variable while others are fixed.
ExplanationLimited adjustment of production factors.
#8
What is the economic profit in the long run for a perfectly competitive firm?
Zero.
ExplanationLong-run equilibrium eliminates economic profit.
#9
In perfect competition, what happens to the number of firms in the long run if firms are earning economic profits?
New firms enter the market, increasing the number of firms.
ExplanationProfitable conditions attract new firms.
#10
Which of the following statements best describes the demand curve faced by a perfectly competitive firm?
It is perfectly elastic.
ExplanationFirms can sell any quantity at the market price.
#11
In a perfectly competitive market, what is the relationship between the market price and the firm's marginal revenue?
Market price equals marginal revenue.
ExplanationPrice equals incremental revenue for the firm.
#12
What is the main reason for the absence of economic profits in the long run in a perfectly competitive market?
Marginal revenue equals marginal cost for all firms.
ExplanationProfit maximization condition eliminates profit.
#13
In perfect competition, what is the relationship between the price and marginal cost in the long run?
Price equals marginal cost.
ExplanationEquilibrium condition in perfect competition.