Principles of Perfect Competition Quiz
Test your understanding of perfect competition with this quiz. Explore the number of firms, market characteristics, profit trends, and more.
#1
In perfect competition, how many firms are there?
One
A few large firms
Many small firms
Two or three firms
#2
What is a characteristic of a perfectly competitive market?
Product differentiation
Barriers to entry
Homogeneous products
Monopoly power
#3
Which of the following is NOT a characteristic of perfect competition?
Homogeneous products
Price-setting power
Perfect information
Free entry and exit
#4
What happens to profits in the long run in perfect competition?
They remain constant
They increase indefinitely
They decrease to zero
They fluctuate randomly
#5
In perfect competition, what is the shape of the demand curve for a firm's product?
Vertical
Horizontal
Downward sloping
Upward sloping
#6
What is the profit-maximizing rule for a firm in perfect competition?
Produce where marginal cost equals average total cost
Produce where marginal revenue equals marginal cost
Produce where marginal revenue exceeds marginal cost
Produce where average revenue equals marginal cost
#7
What is the condition for allocative efficiency in perfect competition?
Marginal cost equals marginal revenue
Price equals marginal cost
Average total cost is minimized
There are no externalities
#8
What is the main reason for the absence of economic profit in the long run in perfect competition?
Existence of barriers to entry
Homogeneous products
Firms are price takers
Perfect information
#9
What is the long-run equilibrium condition for a firm in perfect competition?
Marginal cost equals average total cost
Marginal cost equals marginal revenue
Price equals average total cost
Price equals marginal cost
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