Perfect Competitive Market

In which market structure is there the MOST competition?

• Monopoly
• Oligopoly
• Monopolistic Competition
• Perfect Competition

Perfect competition involves:

• Sellers working together to set prices
• A large number of buyers & sellers
• Difficulty entering & exiting the market
• Little information is available to buyers

The market for milk is an example of perfect competition. Why?

• Sellers offer a nearly identical product
• Anyone can start a dairy farm or leave the dairy business at any time
• Many people buy and sell milk
• All of the above

What type of market does this image represent?

• Perfect Competition 
• Monopolistic Competition 
• Oligopoly
• Monopoly

The image above shows a firm making

• Economic Profit

• Economic loss

• Breaking even

• Shutting down

Should the following firm shutdown?

• Yes

• No

• Not enough information present

For a perfectly competitive firm producing the profit-maximizing quantity, the average total cost is $10 and the average variable cost is $8. If the market price for its product is $10, which of the following is true for the firm? 

• It is sustaining a loss and should shut down. 
• It is earning zero economic profit and will remain in business.
  
• It will temporarily shut down until price rises. 
• The firm is earning positive economic profit. 

In the short run, if a firm produces the level of output at which marginal revenue is equal to marginal cost but price is less than average total cost, the firm will: 

• always shut down production
  
• expand output to lower its average fixed cost 
• continue to operate if price is greater than its average variable cost
  
• increase out put to increase revenue