Deck 12: Perfect Competition

Question 1

In perfect competition:

A) There are a few firms.
B) There are many firms.
C) There are two firms.
D) There is one firm.

Answer 1

B

Question 2

In perfect competition:

A) Products are homogeneous.
B) Products are differentiated.
C) Brand loyalty is important.
D) Some products are unique.

Answer 2

A

Question 3

In the long run in perfect competition:

A) Normal profits are made.
B) No profits are made.
C) Abnormal profits are made.
D) A loss is made.

Answer 3

A

Question 4

In the long run in perfect competition:

A) Firms are allocatively efficient.
B) Firms make abnormal profits.
C) Firms are productively inefficient.
D) Firms produce where price equals average fixed cost.

Question 5

A perfectly competitive firm produces where:

A) Marginal revenue equals average variable cost.
B) Total revenue equals fixed cost.
C) Marginal revenue equals marginal cost.
D) Total cost equals variable costs.

Question 6

Productive efficiency occurs where:

A) Price equals average fixed cost.
B) Price equals average revenue.
C) Average cost equals marginal cost.
D) Price equals average variable cost.

Question 7

A firm in perfect competition is a price taker; this means:

A) It faces a downward sloping demand curve.
B) It faces a perfectly elastic demand curve.
C) The price never changes.
D) To sell more firms must reduce price.

Question 8

Firms in perfect competition cannot make abnormal profits.

Question 9

Firms in perfect competition must accept the market price.

Question 10

The price elasticity of demand for a firm in perfect competition has a value of ________.

Question 11

In the long run in perfect competition:

A) Total revenue = total cost
B) Total revenue = total variable cost
C) Total revenue = total fixed cost
D) Total revenue = marginal cost

Question 12

In perfect competition profit-maximization always occurs when:

A) Marginal cost equals average cost.
B) Total revenue equals total cost.
C) Marginal revenue equals marginal cost.
D) Total costs are minimized.

Question 13

In perfect competition:

A) Entry into the industry is difficult in the long run.
B) Entry into the industry is easy in the long run.
C) There are a limited number of firms dominating the market.
D) Changes in output by one firm will change the market price.

Question 14

Which of the following types of firms would be most closely associated with a perfectly competitive market structure?

A) Energy companies
B) Restaurants
C) Hairdressers
D) Wheat farms