Deck 1: Understanding Perfect Competition in Economics

Question 1

Which of the following industry is most closely approximates the perfectly competitive model.

A)automobiles
B)cigarette
C)newspaper
D)wheat farming

Answer 1

wheat farming

Question 2

Under perfectly competitive market an individual seller is a

A)price taker
B)price maker
C)individual seller can influence the price
D)none of the above

Answer 2

price taker

Question 3

Uniform price is a feature of

A)perfect competition
B)monopoly
C)monopolistic competition
D)oligopoly

Answer 3

perfect competition

Question 4

Which of the following is not a feature of a perfectly competitive market

A)large number of buyers and sellers
B)homogeneous product
C)group behaviour
D)perfect competition

Question 5

A perfectly competitive firm gets only normal profit when

A)mc = mr
B)ac = ar
C)ac < ar
D)mc = ar

Question 6

Which one of the following is a feature of a perfect competition

A)group behavior
B)selling cost
C)homogeneous product
D)differentiated product

Question 7

Average revenue curve under perfect competition is

A)upward sloping
B)downward sloping
C)horizontal straight line
D)vertical straight line

Question 8

Marginal revenue curve under perfect competition is

A)upward sloping
B)downward sloping
C)horizontal straight line
D)vertical straight line

Question 9

Average revenue curve under imperfect competition is

A)upward sloping
B)downward sloping
C)horizontal straight line
D)vertical straight line

Question 10

Marginal revenue curve under imperfect competition is

A)upward sloping
B)downward sloping
C)horizontal straight line
D)vertical straight line

Question 11

Perfect competition prevails when the demand for the output of each producer is

A)elastic
B)perfectly elastic
C)inelastic
D)perfectly inelastic

Question 12

Equilibrium price is determined under perfect competition by

A)the market demand
B)the market supply
C)the interaction between market demand and market supply
D)none of the above

Question 13

In the market period, market supply curve is

A)perfectly elastic
B)perfectly inelastic
C)elastic
D)inelastic

Question 14

Given the supply of a commodity, in the market period, the price of a commodity is determined by

A)the market demand curve alone
B)the market supply curve alone
C)the market demand curve and the market supply curve
D)none of the above

Question 15

Total profit is maximum when

A)total revenue is equal to total cost
B)total revenue is greater than total cost
C)the positive difference between total revenue and total costs is largest.
D)all of the above

Question 16

Total profits are maximized where

A)tr equals tc
B)tr curve and tc curve are parallel
C)tr curve and tc curves are parallel and tc exceeds tr
D)tr curve and tc curves are parallel and tr exceeds tc

Question 17

The equality between MC and MR is

A)a necessary condition for equilibrium of the firm under perfect condition
B)a sufficient condition for equilibrium of the firm under perfect competition
C)a necessary but not sufficient condition for equilibrium of the firm under perfect condition
D)a necessary and sufficient condition for equilibrium of the firm under perfect condition

Question 18

The condition of equilibrium of the industry under perfect competition is

A)mc = mr
B)mc = ac
C)mc = mr = ar
D)mc = ac = ar

Question 19

In the short-run, a competitive firm can earn

A)normal profit
B)super normal profit
C)loss
D)either a or b or c depending upon the level of average cost.

Question 20

If price is equal to average cost, in the short-run, the competitive firm can earn

A)only normal profit
B)super normal profit
C)loss
D)all of the above

Question 21

If price is greater than average cost, in the short-run, the competitive firm can earn

A)normal profit
B)super normal profit
C)loss
D)all of the above

Question 22

If price is less than average cost, in the short-run, the competitive firm can earn

A)normal profit
B)super normal profit
C)loss
D)all of the above

Question 23

Break-even point is a point where price is equal to

A)ac
B)avc
C)afc
D)mc

Question 24

Shut-down point is a point where price is equal to

A)ac
B)avc
C)afc
D)mc

Question 25

In the long run, a competitive firm can earn

A)normal profit
B)super normal profit
C)loss
D)any of the above