Question 1

The following are conditions of perfect competition except&#10;A)Strong barriers to entry&#10;B)Sellers are large in number&#10;C)Commodity produced is Homogenous&#10;D)Buyers are large in number

Accepted Answer

In a perfect competition market structure, there are no strong barriers to entry. This allows new firms to enter the market freely, which is essential for maintaining the competitive environment. The other options (B, C, D) are characteristics of perfect competition, where the market consists of many sellers and buyers dealing in a homogeneous product.

Question 2

The following are conditions of perfect competition except&#10;A)Sellers are large in number&#10;B)Single buyer&#10;C)Commodity produced is homogenous&#10;D)Freedom to Entry and exit

Accepted Answer

In a perfectly competitive market, there are many buyers and sellers, not a single buyer. A single buyer condition refers to a monopoly buyer or monopsony, which is contrary to the conditions of perfect competition.

Question 3

The condition of short run equilibrium under perfect competition is&#10;A)MC=MR&#10;B)AC=MR&#10;C)AC=AR&#10;D)AR=Selling cost

Accepted Answer

In the short run equilibrium under perfect competition, the condition is that marginal cost (MC) equals marginal revenue (MR). This ensures that the firm is maximizing its profit (or minimizing its loss) at that level of output.

Question 4

The large number of firms producing the same commodity ensure that the individual firm has no control over&#10;A)Price of the commodity&#10;B)The quantity of the commodity&#10;C)Both of the above&#10;D)None of the above

Accepted Answer

In a market with a large number of firms producing the same commodity, it is typically a perfectly competitive market. In such a market, individual firms are price takers and have no control over the price of the commodity or the market quantity. The price is determined by the overall market supply and demand.

Question 5

Individual firm has no control on the price of the commodity in the market is a condition of&#10;A)Perfect competition&#10;B)Monopoly&#10;C)Monopolistic competition&#10;D)Bilateral monopoly

Accepted Answer

In a perfect competition market structure, individual firms are price takers because there are many sellers and buyers, and the product is homogeneous, meaning no single firm can influence the market price.

Question 6

In a Perfect competitive market&#10;A)Firm is the price giver and the industry is a price taker&#10;B)Firm is the price taker and the industry is a price giver&#10;C)Both are price makers&#10;D)Both are price takers

Accepted Answer

In a perfect competitive market, individual firms do not have the power to set prices for their products; instead, the market (or industry) determines the price based on supply and demand. Therefore, firms are price takers, while the industry as a whole acts as the price giver.

Question 7

One of the essential conditions of perfect competition is&#10;A)Product Differentiation&#10;B)Multiplicity of prices for identical product at any one Time&#10;C)Many sellers and few buyers&#10;D)Only one price for identical goods at any one time

Accepted Answer

In a perfectly competitive market, identical goods must have only one price at any given time due to the principle of price taker behavior, where no single buyer or seller has the power to influence market prices.

Question 8

Under perfect market conditions the individual firm in the industry has control over the price of the product.&#10;A)Some&#10;B)Full&#10;C)No&#10;D)None of the above

Accepted Answer

Under perfect market conditions, individual firms have no control over the price of the product. Prices are determined by the forces of supply and demand in the market.

Question 9

The condition of short run equilibrium under perfect competition is&#10;A)MC=MR&#10;B)MC cuts MR from below&#10;C)MC is rising when it cuts AR&#10;D)All the above

Accepted Answer

In a short run equilibrium under perfect competition, the condition for a firm to maximize profit or minimize loss is that the marginal cost (MC) equals the marginal revenue (MR), MC must cut MR from below to ensure that the firm is not in the inelastic part of the demand curve (which would mean that reducing output would increase profits), and since the average revenue (AR) is constant and equal to MR in perfect competition, MC rising when it cuts AR ensures the firm is producing at an efficient scale. Therefore, all the given conditions are part of the short run equilibrium under perfect competition.

Question 10

Under perfect market conditions mobility of resources and products are&#10;A)Ensured&#10;B)Not ensured&#10;C)Not considered&#10;D)None of the above

Accepted Answer

Under perfect market conditions, mobility of resources and products is ensured to allow for free competition and efficient allocation of resources.

Question 11

A firm under perfect competitions shall be in equilibrium when marginal cost will be equal to marginal revenue and marginal cost curve is still&#10;A)Declining&#10;B)Rising&#10;C)Constant&#10;D)None of the above

Accepted Answer

The answer of A firm under perfect competitions shall be...

Question 12

Cross elasticity of demand under Perfect competition is?&#10;A)Zero&#10;B)Infinitely elastic&#10;C)Highly elastic&#10;D)Highly inelastic

Accepted Answer

The answer of Cross elasticity of demand under Perfect competition...

Question 13

Which of the following is not a type of market structure?&#10;A)Competitive monopoly&#10;B)Oligopoly&#10;C)Perfect competition&#10;D)All of the above are types of market structures.

Accepted Answer

The answer of Which of the following is not a...

Question 14

If a firm sells its output on a market that is characterized by a single seller and many buyers of a homogeneous product for which there are no close substitutes and barriers to long-run resource mobility, then the firm is

A)a monopolist
B)an oligopolist
C)a perfect competitor
D)a monopolistic competitor

Accepted Answer

The answer of If a firm sells its output on...

Question 15

A perfectly competitive firm should reduce output or shut down in the short run if market price is equal to marginal cost and price is&#10;A)greater than average total cost&#10;B)less than average total cost&#10;C)greater than average variable cost&#10;D)less than average variable cost

Accepted Answer

The answer of A perfectly competitive firm should reduce output...

Deck 7: Market Structures and Perfect Competition