Question 1

Which of the following is NOT a characteristic of a perfectly competitive market?

Accepted Answer

Firms can influence the market price

Question 2

In a perfectly competitive market, what does it mean for firms to be 'price takers'?

Accepted Answer

Firms must accept the market price and cannot influence it

Question 3

If the market price for wheat is $7 per bushel, what is the marginal revenue for a perfectly competitive wheat farmer selling an additional bushel?

Accepted Answer

$7

Question 4

Which equation correctly represents total revenue for a firm?

Accepted Answer

$$TR = P 	imes Q$$

Question 5

A perfectly competitive firm will maximize profit by producing the quantity where:

Accepted Answer

$$MR = MC$$

Question 6

If a firm’s total revenue is $$300 and its total cost is 225$$, what is its profit?

Accepted Answer

$$75$$

Question 7

Which formula gives profit per unit for a firm?

Accepted Answer

$$Profit\ per\ unit = P - ATC$$

Question 8

In the short run, when should a perfectly competitive firm shut down?

Accepted Answer

When $$P \u003c AVC$$

Question 9

What is the long-run outcome for firms in a perfectly competitive market?

Accepted Answer

Firms break even and earn zero economic profit

Question 10

Which of the following best describes allocative efficiency in a perfectly competitive market?

Accepted Answer

The last unit provides a marginal benefit to consumers equal to the marginal cost of producing it

Question 11

Suppose a firm in a perfectly competitive market faces the following costs: $$TC = 1200$$, $$Q = 4$$, $$P = 300. $$What is the profit per unit?

Accepted Answer

$$Profit\ per\ unit = (P - ATC) = 300 - (1200/4) = 0$$

Question 12

If a firm’s marginal cost is $$150$$ and the market price is $$300$$, what should the firm do to maximize profit?

Accepted Answer

Increase output

Question 13

Which of the following is true about the supply curve for a perfectly competitive firm?

Accepted Answer

It is the portion of the marginal cost curve above average variable cost

Question 14

In the long run, what happens when firms in a perfectly competitive market are earning economic profits?

Accepted Answer

New firms enter, increasing supply and driving price down

Question 15

A wheat farmer in a perfectly competitive market increases output from 2 to 3 bushels. If the price is $7 per bushel, what is the increase in total revenue?

Accepted Answer

$$7$$

Question 16

Which of the following is considered a sunk cost for a firm?

Accepted Answer

A non-recoverable payment for equipment already purchased

Question 17

If $$MR \u003e MC$$ for a perfectly competitive firm, what should the firm do?

Accepted Answer

Increase output

Question 18

Which of the following best describes productive efficiency in a perfectly competitive market?

Accepted Answer

Firms produce at the lowest possible cost

Question 19

If the market price falls below a firm’s average variable cost, what is the best short-run decision for the firm?

Accepted Answer

Shut down production

Question 20

Which of the following equations represents the profit-maximizing condition for a perfectly competitive firm?

Accepted Answer

$$P = MC$$

Perfect Competition: Structure, Revenue, and Profit Maximization

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