Perfect Competition

Perfectly competitive markets sell

• differentiated products

• homogenous products

• a variety of both types of products

Which market structure has no barriers to entry and no control over the price of the goods that they sell?

• perfect competition

• monopolistic competition

• oligopoly

• monopoly

Marginal revenue is

• P x Q

• TR / Q

• change in TR / change in Q

• change in TR x change in Q

The market demand curve for a perfectly competitive industry is

• perfectly elastic

• perfectly inelastic

• downward sloping

• upward sloping

The demand curve for an individual firm within a perfectly competitive industry is

• perfectly elastic

• perfectly inelastic

• downwards sloping

• upwards sloping

Perfectly competitive firms will maximize profit where

• MR > MC

• MR < MC

• MR = MC

• TR = P x Q

The profit equation is

• (P x Q) - ATC

• (P - ATC) x Q

• ATC - (Q x P)

• TR - ATC

If P < ATC, a firm should

• shut down in the short run

• stay open in the short run

• stay open in the short run if P > AVC

• shut down in the short run if P > AVC

Why aren't firms in perfectly competitive markets able to earn profits in the long run?

• Because there are no barriers to entry

• Because there are too many firms

• Because there are too few firms

• Because there are significant barriers to entry

What type of advertising would we expect to see in perfectly competitive markets?

• Significant advertising by individual firms

• No advertising by individual firms but potential advertising by the industry as a whole

• No advertising by individual firms or by the industry as a whole

• Significant advertising by individual firms and by the industry as a whole