Perfect Competition

In a perfectly competitive market, firms are considered to be:

• Price makers

• Price takers

• Monopolists

• Oligopolists

True or False: In perfect competition, the market demand curve is perfectly elastic.

• True

• False

Which of the following best describes market equilibrium in perfect competition?

• Supply exceeds demand

• Demand exceeds supply

• Supply equals demand

• Prices are set by the government

In the short run, a perfectly competitive firm will shut down if:

• Total revenue is greater than total cost

• Price is less than average variable cost

• Price is greater than average total cost

• Marginal cost is greater than marginal revenue

Which of the following is a profit maximization strategy for a firm in perfect competition?

• Setting a higher price than competitors

• Producing where marginal cost equals marginal revenue

• Reducing production to increase scarcity

• Advertising to increase demand

True or False: In the long run, firms in perfect competition can influence the market price.

• True

• False

Which of the following is NOT a characteristic of perfect competition?

• Free entry and exit

• Differentiated products

• Large number of buyers and sellers

• Perfect information

In perfect competition, the demand curve faced by an individual firm is:

• Downward sloping

• Upward sloping

• Perfectly elastic

• Horizontal straight line

True or False: In perfect competition, firms can earn supernormal profits in the short run.

• True

• False

Which of the following conditions must hold true for a firm to be in long-run equilibrium in perfect competition?

• Marginal cost equals average total cost

• Price equals marginal cost

• Price is greater than average total cost

• Marginal revenue is less than marginal cost