3.1.4.3 Perfectly Competitive Market Quiz

What happens to profits in the long run in a perfectly competitive market?

• Firms make supernormal profits

• Firms make losses

• Only normal profits are made

• Firms make abnormal profits

What is assumed about firms in a perfectly competitive market regarding profit maximization?

• Firms are long run profit maximisers

• Firms are short run profit maximisers

• Firms do not aim to maximize profits

• Firms aim to minimize losses

What is the effect of low barriers to entry in a perfectly competitive market?

• It increases the market power of existing firms

• It decreases the market power of new firms

• It allows new firms to enter the market easily

• It prevents new firms from entering the market

What happens to supernormal profits in the long run in a perfectly competitive market?

• They increase

• They remain the same

• They are competed away

• They turn into losses

What does the new equilibrium at P=MC mean for firms in the long run?

• Firms produce at the new output of Q1

• Firms produce at the new output of Q2

• Firms produce at the new output of Q3

• Firms produce at the new output of Q4

What might increase dynamic efficiency in the short run in a perfectly competitive market?

• Decreased investment

• Supernormal profits

• Higher prices

• Lower production

What is a disadvantage of a perfectly competitive market in the long run?

• Increased supernormal profits

• Limited dynamic efficiency

• Higher economies of scale

• Increased allocative efficiency

What is a common feature of firms in a perfectly competitive market?

• Large size

• Small size

• Monopoly power

• High differentiation

What is a real-life factor that makes competition imperfect in a perfectly competitive market?

• Allocative efficiency

• Branding

• Productive efficiency

• Supernormal profits

What is the impact of supernormal profits in the short run on dynamic efficiency?

• Decrease dynamic efficiency

• Increase dynamic efficiency

• No impact on dynamic efficiency

• Eliminate dynamic efficiency