Question

Which statement is not true for a perfectly competitive market? *

a-Firms are price takers

b-Only one seller.

c-Many buyers.

d-No barriers to entry or exit.

For a perfectly competitive firm, if total revenue is less than total cost but greater than total variable cost, that means: *

a-Price is below average variable cost only

b-Price is above average total cost only

c-Price is below average total cost but above average variable cost

d-Price is below both average total cost and average variable cost

The closest example of a perfectly competitive market is *

a-BMW

b-Smart phones

c-Rice

d-Ogéro Lebanon

In perfect competition, a firm’s demand curve is: *

a-Horizontal

b-Vertical

c-Downward sloping

d-Upward sloping

Answer 1

Answer-1. Correct option is 'b'

''Only one seller'' this statement is not true for a perfectly competitive market. Because a monopoly market considered there is only one seller in the market, the monopoly decides the price of the product that it will sell without any competition. Perfectly competitive market structure follows these conditions:

1) All firms sell an identical product.

2) All firms are price taker.

3) Free entry and exit

4) Large number of buyers and sellers

Answer-2. Correct option is 'c'

For a perfectly competitive firm, if total revenue is less than total cost but greater than total variable cost, that means price is below average total cost but above average variable cost. If a price a greater than average variable cost, a firm recieve sufficient revenues to pay all variable cost plus some fixed cost. As such the economic loss in less than the total fixed cost.

Answer-3. Correct option is 'c'

The closest example of a perfectly competitive market is Rice. Rice is a homogeneous good. So, if the seller is selling rice at higher prices to the customers, customers can always go to the other sellers.

Answer-4. Correct option is 'a'

In perfect competition, a firm’s demand curve is horizontal. The demand curve is horizontal for each of the individual firms in a perfectly competitive market. This is because there are many of them, they each sell the same thing, so if they want to charge more than the prevailing market price, nobody would buy from them.