Question

Perfectly competitive industries are:

Group of answer choices

A. difficult to enter because there are already so many producers in the industry.

B. not particularly appealing or attractive to enter because there tend to be so many buyers that it is difficult to deal with them.

C. relatively easy to enter but not so easy to exit from.

D. none of the above

A perfectly competitive firm should increase its level of production as long as

Group of answer choices

A. total revenue is less than total cost.

B. the total revenue curve is rising.

C. marginal revenue is greater than marginal cost.

D. the marginal revenue curve is rising.

If firms are earning zero economic profits, they must be producing at an output level at which:

Group of answer choices

A. price equals marginal cost.

B. price equals average total cost.

C. price equals average variable cost.

D. marginal revenue equals marginal cost.

Which of the following is a characteristic of perfect competition?

Group of answer choices

A. many sellers and few buyers

B. many buyers and few sellers

C. a homogeneous product

D. high barriers to entry and exit

In a perfectly competitive market, the market demand curve is perfectly elastic.

Group of answer choices

A. True

B. False

Answer 1

Answer : 1) The answer is option D.

In perfect competition the firms can freely enter into the market and freely can exit from the market. Hence except option D other options are not correct. So, option D is the correct answer.

2) The answer is option C.

For perfectly competitive firm the profit maximizing condition is MR (Marginal Revenue) = MC (Marginal Cost). If MR is greater than MC then the firm should increase the production level continuously until it reaches to MR = MC. Hence except option C other options are not correct. Therefore, option C is the correct answer.

3) The answer is option B.

Firms earn zero economic profit if the price is equal to ATC (Average Total Cost). Hence except option B other options are not correct. Therefore, option B is the correct answer.

4) The answer is option C.

In perfect competition all firms sell homogeneous product. This is a characteristic of perfect competition. Hence except option C other options are not correct. Therefore, option C is the correct answer.

5) The answer is "False".

In perfectly competitive market the market demand curve is downward sloping. But for perfectly competitive firm the demand curve is perfectly elastic. So, the given statement is false.