Question

Questions1. Which one of the following is not an assumption of the competitive model? A. homogeneous productB. unrestricted mobility of resourcesC. economies ofscaleD. possession of all relevant information

2. Which of the following is an assumption for the model of perfect competition? A. The firms in the industry produce a homogeneous product.B. The firms in the industry actively compete with eachother by advertising.C. There are no natural impediments to entry, but there may be minor artificial impediments such as licensingD. Firms have a decreasing short-run marginal cost curve.

3. Product homogeneity implies that A. consumers only care about the price.B. consumers know automatically which seller produces the highest quality goods.C. the demand curve a competitive firm faces is downward sloping.D. consumers can judge quality by price.

4. The competitive firm is known as a price taker because A. it accepts the highest price it can charge. B. only competitors adhere to the survivor principle.C. it produces a rate of output that makes marginal cost a minimum valueD. it accepts the market price as a given.

5. Free entry and exit does not exist whenA. there is no differential impediments across firms in the mobility of resources into and out of an industry. B. a firm experiences economies of scale. C. an incumbent firm has an exclusive government patent.D. a firm experiences diseconomies of scale.

6. Which of the following represents the most valid criticism of an economic system based upon competitive markets?A. Competitive assumptions are never satisfied. B. Competitive markets work efficiently in theory but not in practice.C. It generally takes an extremely large number of firms in a market to accommodate price taking behavior.D. Income distributions may be inequitable.

7. Which of the following is not an objection to the assumption of profit maximization? A. Owners of firms are interested in maximizing utility rather than profits. B. Profit maximization does not aid us in understanding how firms select their optimal rate of output.C. Owners of firms face uncertainty and do not know all that is necessary to truly maximize profits.D. Managers of large corporations make the business decisions, and they have different objectives than the owners.

8. The observation that in competitive markets firm which do not approximate profit maximization fail while those that do succeed is known as the upon competitive markets?A. profit-maximizing principle. B. successor principleC. survivor principle.D. principle of winner-take-all.

9. The demand curve of a perfectly competitive firm is determined by A. the level of the quality of the good the firm produces B. the intersection of the market demand and supply curves.C. the reputation of the firm. D. the price the firm chooses to charge.1

10. For a perfectly competitive firm, the demand curve A. coincides with the marginal revenue curve. B. coincides with the average revenue curve.C. A and B are true.D. Neither A nor B are true.

11. The perfectly competitive firm's demand curve is horizontal because, A. it is part of the industry's demand curve which is horizontal in competitive industries.B. its demand is so elastic that the firm behaves as a price-taker.C. all the firms in the industry have agreed upon the price to charge customers.D. none of the above.1

12. A perfectly competitive firm faces a horizontal demand curve, which implies that A. price never changesB. the firm cannot affect price by any action it takes.C. the output rate of the firm is indeterminate.D. the firm makes zero profits.

13. The competitive firm's demand curve is for all practical purposes A. unitary price elastic over the relevant range of output. B. perfectly elastic over the relevant range of output.C. perfectly inelastic over the relevant range of output.D. elastic above the market price and inelastic below the market price.1

14. The competitive firm maximizes its profit by operating whereA. average cost is at a minimum B. total revenue is at a maximum C. profit per unit is at a maximum.D. marginal cost equals price, as long as P > AVC.

15. The short-run supply curve for a perfectly competitive industry is A. upward sloping because of the law of diminishing marginal returns. B. found by summing horizontally the marginal costs curves that lie above the minimum of average variable cost of all firms in the industryC. perfectly elastic in the case of homogeneous products.D. Only A and B are true.

16. A competitive industry, will be in long-run equilibrium when A. each firm in the industry is earning zero economic profit.B. no entry or exit occurs.C. the total quantity produced at the prevailing price equals the total quantity consumers want to purchase.D. all of the above.

Answer 1

1. Which one of the following is not an assumption of the competitive model?

Economies of scale.

2. Which of the following is an assumption for the model of perfect competition?

A. The firms in the industry produce a homogeneous product.

3. Product homogeneity implies that

A. consumers only care about the price.

4. The competitive firm is known as a price taker because

D. it accepts the market price as a given.

5. Free entry and exit does not exist when

B. A firm experiences economies of scale.

6. Which of the following represents the most valid criticism of an economic system based upon competitive markets?

B. Competitive markets work efficiently in theory but not in practice.

Practically speaking we don't have perfect information available therefore it is only good in theory but not in practice.

Not sure for the next two questions. Please understand my limitation I cannot put alot of time into it as a large number of questions are there.

7. Owners of firms are interested in maximizing utility rather than profits.

8. Survivor principle.

9. The demand curve of a perfectly competitive firm is determined by

B. the intersection of the market demand and supply curves.

10. For a perfectly competitive firm, the demand curve

C. Both A and B.

11. The perfectly competitive firm's demand curve is horizontal because,

B. its demand is so elastic that the firm behaves as a price-taker.

12. A perfectly competitive firm faces a horizontal demand curve, which implies that

B. the firm cannot affect price by any action it takes.

13. The competitive firm's demand curve is for all practical purposes

B. perfectly elastic over the relevant range of output.

14. The competitive firm maximizes its profit by operating where

D. marginal cost equals price, as long as P > AVC.

15. The short-run supply curve for a perfectly competitive industry is

B. found by summing horizontally the marginal costs curves that lie above the minimum of average variable cost of all firms in the industry

16. A competitive industry, will be in long-run equilibrium when

A. each firm in the industry is earning zero economic profit.