Perfect Competition Quiz

In a perfectly competitive market, the price of the product is determined by:

• Each individual firm

• The government

• Market demand and supply

• The firm's average cost

A perfectly competitive firm maximizes profit by producing the quantity where:

• Price = Average Variable Cost

• Marginal Cost = Average Total Cost

• Price = Marginal Revenue = Marginal Cost

• Total Revenue = Total Cost

In the short run, a perfectly competitive firm will continue to operate as long as:

• Total revenue exceeds total cost

• Price is greater than average fixed cost

• Price is greater than average variable cost

• Price equals marginal cost

A firm in a perfectly competitive market is a:

• Price taker

• Price maker

• Profit setter

• Monopoly competitor

In the long run, economic profit in a perfectly competitive industry is:

• Always positive

• Always negative

• Zero

• Maximized

If price falls below average variable cost, the firm should:

• Continue producing

• Shut down in the short run

• Increase production

• Increase price

Which of the following is true at the break-even point?

• Total cost is greater than total revenue

• Economic profit is negative

• Price = Average Total Cost

• Price = Marginal Cost = Average Variable Cost

The supply curve of a perfectly competitive firm in the short run is the:

• Entire marginal cost curve

• Marginal cost curve above average variable cost

• Average total cost curve

• Demand curve

Entry of new firms in the long run occurs when:

• Firms earn economic losses

• Firms earn normal profits

• Economic profits are present

• Marginal revenue exceeds marginal cost

Exit of firms from a perfectly competitive industry in the long run occurs when:

• Economic profits are positive

• Marginal revenue equals marginal cost

• Economic losses are incurred

• Fixed costs increase