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Perfect Markets

Authored by Chris Swanson

Social Studies

12th Grade

Used 9+ times

Perfect Markets
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17 questions

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1.

MULTIPLE CHOICE QUESTION

2 mins • 1 pt

All of the following are essential characteristics of a perfectly competitive industry EXCEPT:

All products produced by the firms in the industry are homogeneous.

All firms in the industry are price takers.

Price is equal to marginal revenue for every firm in the industry.

There are barriers to entry into and exit from the industry.

2.

MULTIPLE CHOICE QUESTION

2 mins • 1 pt

Perfect competition is best described as a market with

few firms producing essentially the same product

many firms producing essentially the same product

many firms producing very different products

few firms producing very different products

3.

MULTIPLE CHOICE QUESTION

2 mins • 1 pt

In a perfectly competitive market, a firm

commands a large share of a very small market

can only control how much it decides to produce at the prevailing market price

has some market power due to high barriers to entry into the market

can influence demand across the market through advertising

4.

MULTIPLE CHOICE QUESTION

2 mins • 1 pt

A profit-maximizing, perfectly competitive firm has economic losses in the short run. If the firm continues to produce and sell its goods, then which of the following must be true?

The firm is covering all of its fixed and variable costs of production.

The firm is covering all of its fixed costs but not all of its variable costs of production.

The firm must have raised the price of its goods in order to minimize its losses.

The firm is covering all of its variable costs but not all of its fixed costs of production.

5.

MULTIPLE CHOICE QUESTION

2 mins • 1 pt

For a perfectly competitive firm producing the profit-maximizing quantity, the ATC is $10 and the AVC is $8. At a market price of $10, which of the following is true?

It is earning zero economic profit and will remain in business.

It is sustaining a loss and should exit the industry in the long run.

It will temporarily shut down until price rises.

The firm is earning positive economic profit.

6.

MULTIPLE CHOICE QUESTION

1 min • 1 pt

Total Revenue (minus) Explicit and Implicit cost =

Accounting Profit

Economic Profit

Economic Cost

Total Profit

7.

MULTIPLE SELECT QUESTION

2 mins • 1 pt

Select all that apply: When should a firm decide to shutdown?

When their demand curve is below AVC

When their MR curve is below AVC

When the price is below the AVC

When the MC is below the AVC

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