Reading 18: Perfect Competition LOS a习题精选 2010, companies, following, perfect

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LOS a: Describe the characteristics of perfect competition, explain why companies in a perfectly competitive market are price takers, and differentiate between market and company demand curves.

A perfect competition has all of the following characteristics EXCEPT:

A) barriers to entry don't exist.

B) a large number of independent firms.

C) a differentiated product.

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In a perfectly competitive market all the firms produce a homogeneous product.

 

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Which of the following is NOT a condition of a perfectly competitive market?

A) Sellers make economic profits.

B) Indistinguishable products.

C) Firms face elastic demand curves.

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The only item listed that is not a condition of a perfectly competitive market is that sellers make economic profits. In fact, sellers do not make economic profit after taking into account their opportunity costs.

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Which of the following characteristics of perfect competition explains why firms in perfect competition are referred to as price takers?

A) There are no barriers to entry or exit.

B) The demand curve is horizontal for firms in perfect competition.

C) Each firm is small relative to the total market.

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Firms under perfect competition face horizontal (perfectly elastic) demand curves. They can sell all of their output at the prevailing market price, but they will sell nothing if they set their output price above the market

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Firms in a perfectly competitive industry will increase their output until which of the following conditions is met?

A) Marginal revenue equals average total cost.

B) Marginal cost equals price.

C) Total revenue equals price.

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When a firm operates under conditions of perfect competition, marginal revenue always equals price. Under perfect competition, price is constant (a horizontal line) so marginal revenue is constant. Therefore a firm will increase output until marginal cost equals price.

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In a perfectly competitive market, what determines the price of the product?

A) Market supply and demand.

B) The producers of the product.

C) The members of the supply chain.

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Individual firms in perfect competition have no influence over market price. They are price takers who must sell at the prevailing market price. If they set their price higher than the market, they will sell nothing.

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The demand curve for a firm in a perfectly competitive market is:

A) horizontal.

B) upward sloping.

C) downward sloping.

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In a market of perfect competition an individual firm’s demand schedule is perfectly elastic (horizontal).

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A firm has the following characteristics:

• relatively small in size.
• marginal revenue is equal to the selling price.
• economic profits will not be earned for any significant period of time.

The firm is best described as existing in a(n):

A) price searcher market.

B) monopolistic market structure.

C) purely competitive market.

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The firm being described is a price taker firm in a purely competitive market. These firms must sell their product at the going market price, there are no

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Which of the following is a characteristic of perfect competition?

A) The products of different firms are sold at different prices.

B) There are a few sellers.

C) There are no barriers to entry into the market.

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The only true statement listed in the question is that, under perfect competition there are no barriers to entry into the market. Each of the other possible answers is not a characteristic of perfect competition. While the competitors can earn positive economic profits in the short-run, they cannot earn long term economic profits due to ease of entry and exit.

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Which of the following is NOT a characteristic of perfect competition?

A) The demand curve for an individual firm is a vertical line.

B) The size of each firm is small relative to the size of the overall market.

C) The products produced within a given market are homogenous.

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Under perfect competition individual firms have no control over price resulting in a demand schedule that is perfectly elastic or horizontal.

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An economic market characterized by a large number of independent firms all producing identical products is best described as:

A) monopolistic competition.

B) monopoly.

C) perfect competition.

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In a perfectly competitive economic market, there are many independent firms, each seller is small relative to the total market, and there are no barriers to entry or exit.