Micro_tutorial_8

Which is NOT a characteristic of a perfectly competitive market?

• Many buyers and sellers

• Free entry and exit

• Differentiated products

• Full information for buyers and sellers

What type of demand curve does a perfectly competitive firm face?

• Upward sloping

• Horizontal

• Downward sloping

• Vertical

In perfect competition, if a firm produces at a point where marginal cost is greater than marginal revenue, it should:

• Increase production

• Decrease production

• Maintain current output

• Shut down immediately

Which of the following is true about long-run equilibrium in perfect competition?

• Firms earn positive economic profit.

• Price equals marginal revenue but exceeds marginal cost.

• Price equals average total cost.

• Firms can freely exit but not enter the market.

If a perfectly competitive firm's price falls below its average variable cost in the short run, the firm should:

• Produce at maximum capacity

• Shut down production

• Raise its price

• Continue producing at a loss

Which cost curve determines whether a firm shuts down in the short run?

• Average Total Cost (ATC)

• Average Fixed Cost (AFC)

• Average Variable Cost (AVC)

• Marginal Cost (MC)

Perfect competition maximizes which type of efficiency?

• Allocative efficiency

• Dynamic efficiency

• X-efficiency

• Technical efficiency

When price equals minimum average variable cost, the firm is:

• Breaking even

• Incurring losses but should keep producing

• At its shutdown point

• Making profits

What happens when a new firm enters a perfectly competitive market?

• Market price rises

• Market price falls

• Existing firms' profits increase

• Quantity supplied decreases

The market supply curve in perfect competition is derived from:

• The horizontal summation of all individual supply curves

• The average supply curve of individual firms

• The demand curve of the industry

• The marginal cost curve of one firm