Principles of Perfect Competition in Microeconomics Quiz

Perfect competition involves many small firms.

Perfect competition features identical or homogeneous products.

Perfect competition does not involve price-setting power for individual firms.

In perfect competition, marginal revenue equals the price for an individual firm.

Perfect information in perfect competition implies that firms have complete information about market conditions.

The demand curve for a perfectly competitive firm is perfectly elastic.

In perfect competition, price equals marginal revenue for an individual firm.

The average revenue curve for a perfectly competitive firm is horizontal.

A firm in perfect competition shuts down in the short run if price is less than average variable cost (P < AVC).

Allocative efficiency in perfect competition occurs when price equals marginal cost (P = MC).

Long-run equilibrium in perfect competition occurs when price equals marginal cost (P = MC).

In the long run, firms in perfect competition earn zero economic profit, which equals normal profit.

If a firm in perfect competition incurs losses in the short run, the market price decreases.

Positive economic profit in the long run attracts new firms, causing entry into the market.

In the short run, marginal cost intersects average variable cost at its minimum point for a firm in perfect competition.