#1
In perfect competition, how many firms are there in the market?
Many small firms
ExplanationNumerous firms with insignificant market share
#2
What is a characteristic feature of perfect competition?
Homogeneous products
ExplanationIdentical goods offered by all firms
#3
What is the shape of the demand curve for a firm in perfect competition?
Horizontal
ExplanationFlat demand curve at the market price
#4
Which of the following is a characteristic of perfect competition?
Free entry and exit
ExplanationEase of entry and exit for firms in the industry
#5
Which of the following is true for a firm in perfect competition in the long run?
Price equals marginal cost
ExplanationPrice equals long-run marginal cost
#6
What happens to economic profits in the long run in perfect competition?
They decrease to zero
ExplanationEconomic profits erode due to free entry and exit
#7
What is the condition for allocative efficiency in perfect competition?
P = MC
ExplanationPrice equals Marginal Cost
#8
What is the profit-maximizing condition for a firm in perfect competition in the short run?
MR = MC
ExplanationMarginal Revenue equals Marginal Cost
#9
What is the relationship between marginal revenue and price for a firm in perfect competition?
MR = P
ExplanationMarginal Revenue equals Price
#10
Which of the following is a characteristic of perfect competition in the long run?
Zero economic profits
ExplanationEconomic profits are driven to zero by competition
#11
Which of the following is not a barrier to entry in perfect competition?
Product differentiation
ExplanationNo product differentiation exists among firms
#12
Which of the following is a short-run supply curve for a firm in perfect competition?
Marginal cost curve above average variable cost
ExplanationSupply curve at prices above average variable cost
#13
What is the shutdown condition for a firm in perfect competition?
P < AVC
ExplanationPrice falls below Average Variable Cost
#14
Which of the following is a characteristic of a firm in long-run equilibrium in perfect competition?
Price equals minimum average total cost
ExplanationPrice equals lowest achievable average total cost
#15
In the long run, what happens to a firm in perfect competition if it is making economic losses?
It exits the market
ExplanationFirms leave the market due to inability to cover costs