Lecture_8

What is a characteristic of a perfectly competitive market?

• Few sellers

• Differentiated products

• Free entry and exit

• Price-making firms

Why are perfectly competitive firms considered price takers?

• They set the market price.

• They can influence demand.

• Competition forces them to accept the equilibrium price.

• They sell unique products.

What happens when a firm in perfect competition raises its prices?

• It gains more customers.

• It maintains the same sales.

• It loses all its sales.

• It increases market supply.

What determines the market price in perfect competition?

• Individual firm's pricing strategies

• Government regulation

• Collective supply and demand in the market

• Advertising by firms

In the long run, perfectly competitive firms earn:

• Economic profit

• Zero economic profit

• Negative profit

• Excess profits

What is the shutdown point for a firm in the short run?

• Price = Marginal Cost

• Price < Average Total Cost

• Price < Average Variable Cost

• Price > Fixed Costs

Which curve represents a firm's profit-maximizing decision in perfect competition?

• Price = Average Cost

• Marginal Revenue = Marginal Cost

• Total Revenue = Total Cost

• Price > Average Variable Cost

How does an increase in market price affect a perfectly competitive firm?

• Reduces output

• Encourages higher production

• Results in losses

• Shuts down operations

If price equals average cost in perfect competition, the firm is:

• Making a profit

• Breaking even

• Suffering losses

• Increasing fixed costs

What happens to economic profits in perfect competition over time?

• They disappear.

• They increase indefinitely.

• They turn into accounting profits.

• They remain constant.