Multiple choice problems on Perfect competition
1) Which of the subsequent is not necessarily a characteristic of perfect competition?
a) low prices
b) a large number of buyers and sellers
c) a homogeneous product
d) perfect information
2) In the short run, a perfectly competitive ball bearing manufacturer will continue to capable to produce at a loss if
a) It is covering all of its fixed cost
b) it is covering all of its variable cost plus part of its fixed cost
c) Variable cost is less than fixed cost
d) Fixed cost is zero
3) The golden rule of profit maximization states which any company maximizes profit by producing where marginal revenue equals marginal cost
a) Demand is unit elastic, and total revenue is greatest
b) Price equals marginal revenue
c) Price equals marginal cost
4) Which of the characteristics of perfect competition assures which economic profit will be zero in the long run?
a) There is easy entry and exit in the market.
b) Each company is a price taker.
c) Each company has access to perfect information.
d) Each company is small relative to the market.
5) A constant-cost company is distinguished by the fact which
a) Companies' short-run average total costs are horizontal
b) Companies' short-run marginal cost curves are horizontal
c) The long-run company supply curve is perfectly elastic
d) The short-run company supply curve is perfectly elastic
6) Commodity products are
c) perceived by consumers to be identical
d) made by one manufacturer
7) In a perfectly competitive company we are likely to find
a) Companies producing a wide variety of products
b) Barriers to entry
c) No profit possible in the short run
d) Companies which do not advertise
8) Perfectly competitive companies are price takers because
a) all small companies must take the price set by the largest company in the market
b) companies take the price which government determines is a "fair" price
c) each company is small and goods are perfect substitutes for one another
d) free entry and exit in the short run creates a constant market price in the long run
9) In perfect competition, if one company raises its price,
a) others will follow
b) which company will increase its revenues
c) which company will lose revenues because other companies will not follow
d) all consumers will be adversely affected
10) Suppose, at its present rate of output, a perfectly competitive company's marginal revenue exceeds both its marginal cost and its average variable cost. To maximize profit, the company should
a) lower the price
b) raise the price
c) increase output
d) reduce output