Question 1

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

Accepted Answer

Wheat farming is closest to the perfectly competitive model because it involves many small producers, homogeneous products, and easy market entry and exit.

Question 2

Under perfectly competitive market an individual seller is a

Accepted Answer

In a perfectly competitive market, an individual seller has no control over the market price and must accept the prevailing market price, making them a price taker.

Question 3

Uniform price is a feature of

Accepted Answer

In perfect competition, many firms sell identical products, leading to a uniform price determined by market supply and demand.

Question 4

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

Accepted Answer

In a perfectly competitive market, individual buyers and sellers act independently rather than as part of a coordinating group or collective, which is what "group behaviour" implies. The other options are characteristic features of perfect competition.

Question 5

A perfectly competitive firm gets only normal profit when

Accepted Answer

A perfectly competitive firm gets only normal profit when average cost (AC) equals average revenue (AR), indicating that the firm is covering all its costs, including the opportunity cost of capital, but is not making any economic profits.

Question 6

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

Accepted Answer

In a perfect competition, all firms sell products that are homogeneous, meaning they are identical or very similar in nature, allowing for no single firm to influence the market price based on product differentiation.

Question 7

Average revenue curve under perfect competition is

Accepted Answer

Under perfect competition, the average revenue curve is a horizontal straight line because the price remains constant regardless of the quantity sold.

Question 8

Marginal revenue curve under perfect competition is

Accepted Answer

Under perfect competition, the marginal revenue curve is a horizontal straight line because the firm is a price taker and can sell any quantity of the product at the market price.

Question 9

Average revenue curve under imperfect competition is

Accepted Answer

Under imperfect competition, the average revenue curve is downward sloping. This reflects the fact that to sell more units, firms often have to lower the price, which decreases the average revenue per unit sold.

Question 10

Marginal revenue curve under imperfect competition is

Accepted Answer

Under imperfect competition, the marginal revenue curve is downward slooping because as a firm lowers its price to sell one more unit, the marginal revenue from selling that additional unit is less than the price at which the unit is sold. This is due to the fact that to sell more units, the firm must lower the price on all units sold, not just the additional unit.

Question 11

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

Accepted Answer

The answer of Perfect competition prevails when the demand for...

Question 12

Equilibrium price is determined under perfect competition by

Accepted Answer

Equilibrium price in a perfectly competitive market is determined by the interaction between market demand and market supply, where the quantity demanded equals the quantity supplied.

Question 13

In the market period, market supply curve is

Accepted Answer

In the market period, the market supply curve is perfectly inelastic because producers cannot change the quantity of the good or service in response to a change in price in the very short term.

Question 14

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

Accepted Answer

The answer of Given the supply of a commodity, in...

Question 15

Total profit is maximum when

Accepted Answer

Total profit is maximized when the positive difference between total revenue and total costs is the largest, as profit is defined as total revenue minus total costs.

Question 16

Total profits are maximized where

Accepted Answer

Total profits are maximized when the total revenue (TR) curve and total cost (TC) curve are parallel and TR exceeds TC, indicating the greatest difference between revenue and cost.

Question 17

The equality between MC and MR is

Accepted Answer

The answer of The equality between MC and MR is
...

Question 18

The condition of equilibrium of the industry under perfect competition is

Accepted Answer

The answer of The condition of equilibrium of the industry...

Question 19

In the short-run, a competitive firm can earn

Accepted Answer

In the short run, a competitive firm's earnings can vary based on its average cost relative to the market price. It can earn normal profit if its average cost equals the market price, super normal profit if the market price is above its average cost, or incur losses if the market price is below its average cost.

Question 20

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

Accepted Answer

When price is equal to average cost in the short run, a competitive firm is earning normal profit. This is because all costs, including opportunity costs, are covered, but there is no extra profit above the normal return to the factors of production.

Quiz 1: Understanding Perfect Competition in Economics