Kaden Baker Econ Quiz 1

In a perfectly competitive market, firms are considered to be "price takers" because:

• A) They have the power to set the price.

• B) They take the market price as given without being able to influence it.

• C) They set prices slightly above the competition.

• D) They negotiate prices directly with consumers.

Which of the following is NOT a characteristic of a perfectly competitive market?

• A) Numerous buyers and sellers

• B) Homogeneous (identical) products

• C) Significant barriers to entry

• D) Perfect information among buyers and sellers

In a perfectly competitive market, firms maximize profit by producing at the quantity where:

• A) Marginal cost equals marginal revenue

• B) Total cost is minimized

• C) Average variable cost is lowest

• D) Marginal cost is zero

In a perfectly competitive market, what happens to a firm's economic profit in the long run?

• A) It increases indefinitely

• B) It becomes zero

• C) It fluctuates significantly

• D) It remains constant

In a perfectly competitive market, if one firm decides to raise its price above the market equilibrium price, it will:

• A) Sell more products than before.

• B) Lose all of its customers.

• C) Still be able to sell the same quantity.

• D) Gain more customers from competitors.

If Price is at 4 Dollars, and MR is = to AR, what does the line look like on the graph?

In a perfectly competitive market, when new firms enter the market, what happens to the existing firms' profits?

• A) Profits increase due to more demand.

• B) Profits decrease as supply increases.

• C) Profits remain the same because demand is constant.

• D) Profits are unaffected by new firms entering.

What is the main importance of perfect information in a perfectly competitive economy?

• A) The main importance of perfect information is to ensure efficient market outcomes and eliminate information asymmetries.

• B) Perfect information is irrelevant in a perfectly competitive economy.

• C) It allows consumers to make irrational decisions.

• D) Perfect information leads to monopolies in the market.

Which of the following would make a market less likely to be perfectly competitive?

• A) An increase in the number of firms

• B) Homogeneous products among firms

• C) High start-up costs that limit entry

• D) Perfect knowledge of prices by consumers

What role does consumer choice play in a perfectly competitive market?

• A) Consumer choice has no impact on market outcomes.

• B) It drives firms to innovate and improve product quality.

• C) It leads to price fixing among firms.

• D) Consumer choice is irrelevant as all products are identical.