Quiz on Perfect Competition

What is a characteristic of perfect competition?

• Few buyers and sellers

• Homogeneous products

• High barriers to entry

• Imperfect information

In perfect competition, firms are considered to be:

• Price makers

• Monopolists

• Price takers

• Market leaders

What does total revenue equal in a competitive firm?

• Price + Quantity

• Price x Quantity

• Quantity / Price

• Price - Quantity

What is the profit-maximizing condition for a firm?

• TR = TC

• MC = ATC

• MR = MC

• P = AVC

What happens if marginal revenue is greater than marginal cost?

• Exit the market

• Decrease production

• Increase production

• Shut down operations

What does the marginal-cost curve represent?

• The market price

• The firm's supply curve

• The firm's demand curve

• The average total cost

In the short run, a firm should shut down if:

• P > AVC

• P = MR

• P < AVC

• P = ATC

What is the long-run decision for a firm if total revenue is less than total costs?

• Increase prices

• Increase production

• Exit the market

• Continue operations

What does a firm experience if price is below average total cost?

• Increased market share

• Zero economic profit

• Negative economic profit

• Positive economic profit

What is the shape of the average total cost curve?

• Flat

• U-shaped

• Upward sloping

• Downward sloping