#1
In perfect competition, what is the number of firms?
Many
ExplanationNumerous firms compete in perfect competition.
#2
What is a characteristic feature of a perfectly competitive market?
Homogeneous products
ExplanationProducts are identical in a perfectly competitive market.
#3
What is the shape of the demand curve for a perfectly competitive firm?
Horizontal
ExplanationThe demand curve is flat, indicating price uniformity.
#4
What is the long-run equilibrium condition for a perfectly competitive firm?
Marginal cost equals average total cost
ExplanationLong-run equilibrium is achieved when MC equals ATC.
#5
What is the profit-maximizing rule for a perfectly competitive firm in the short run?
Produce where marginal cost equals marginal revenue
ExplanationProfit maximization occurs when MC = MR.
#6
Which of the following is a characteristic of a perfectly competitive market in the short run?
Firms can freely enter and exit the market
ExplanationFree entry and exit are possible in the short run.
#7
What happens to the market price in the long run in a perfectly competitive market?
It remains constant
ExplanationMarket price remains stable in the long run.
#8
What is the shutdown condition for a perfectly competitive firm in the short run?
When average total cost exceeds price
ExplanationA firm shuts down when it can't cover its AVC.
#9
Which of the following is not a characteristic of perfect competition?
Control over price by firms
ExplanationFirms lack the ability to control prices.
#10
Which of the following is true about a firm in perfect competition in the long run?
Firms can operate at a loss in the long run
ExplanationFirms can continue operating despite losses in the long run.
#11
What is the relationship between marginal revenue and price for a perfectly competitive firm?
Marginal revenue equals price
ExplanationIn perfect competition, MR equals the price.
#12
What is allocative efficiency in perfect competition?
Producing at the point where marginal cost equals marginal revenue
ExplanationAllocative efficiency is achieved when MC = MR.
#13
Which of the following is true about the demand curve for a perfectly competitive firm?
It is perfectly elastic
ExplanationDemand curve is perfectly responsive to price changes.
#14
What is the primary reason for firms to enter a perfectly competitive market?
To maximize economic profit
ExplanationFirms enter to optimize profits in perfect competition.