#1
In perfect competition, how many firms are there?
Many small firms
ExplanationPerfect competition involves many small firms.
#2
What is a characteristic of a perfectly competitive market?
Homogeneous products
ExplanationProducts in perfect competition are identical.
#3
Which of the following is NOT a characteristic of perfect competition?
Price-setting power
ExplanationPerfect competition lacks the ability to set prices.
#4
What happens to profits in the long run in perfect competition?
They decrease to zero
ExplanationIn the long run, profits vanish in perfect competition.
#5
In perfect competition, what is the shape of the demand curve for a firm's product?
Horizontal
ExplanationThe demand curve is flat (horizontal) in perfect competition.
#6
What is the profit-maximizing rule for a firm in perfect competition?
Produce where marginal revenue equals marginal cost
ExplanationMaximizing profit means producing where MR equals MC.
#7
What is the condition for allocative efficiency in perfect competition?
Price equals marginal cost
ExplanationAllocative efficiency is achieved when price equals marginal cost.
#8
What is the main reason for the absence of economic profit in the long run in perfect competition?
Firms are price takers
ExplanationIn perfect competition, firms accept the market price.
#9
What is the long-run equilibrium condition for a firm in perfect competition?
Marginal cost equals average total cost
ExplanationLong-run equilibrium MC equals ATC for firms in perfect competition.