Question

1. Which is characteristic of a perfectly competitive market:

A) THere are many firms in the market

b) It is easy to enter/exit the industry

c) Every firm has a small market share in the industry

d) Information on prices are easily accessible

e) All of the above

2. The perfeclty competitive firm reaches a break even point when:

a) price=total cost

b)price=minimum average total cost

c) price=maximum average total cost

d) price=minimum average variable cost

e)price=maximum average variable cost

3) When a perfectly competitive firm is a price taker, this means that:

a) the firm faces perfectly elastic demand

b)the firm faces demand with elasticity of 1

c)firm faces perfectly inelastic demand

d)price of output=marginal revenue at all levels of output

e) firm faces perfectly elastic demand, AND price of output= marginal revenue at all levels of output.

4) IF a perfectly competitive firm sells 500 of a product at $300 per product. What is the firm's marginal cost and marginal revenue per unit?

a)None of these

b)MC=300, MR=300

c)MC=500, MR=300

d)MC=500, MR=500

e)MC=300, MR=500

5) A perfectly competitive firm produces where:

a)demand=marginal cost

b)marginal revenue=marginal cost

c)all of these

d)average revenue=marginal cost

e)price=marginal cost

Answer 1

a) "E"

all the given options are characteristics of the perfectly competitive market. it has free entry and exit, all the firm and consumers have full knowledge and they cannot influence the market.

b) "B"

When the price is equal to the lowest point of the average total cost the firm under perfect market is breaking even.

c) "E"

Firm faces perfectly elastic demand, And price of output= marginal revenue at all levels of output. If the firm changes the price its demand will get to zero.

d) for a firm under perfect condition the price and the marginal cost and the and the marginal revenue are always equal. the answer is "B".

e) "E" price and the marginal cost are equal.