Chapter 6 Self-test questions

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The perfect competition market is considered as an extreme form of competitive structure because ____________.

No firm has market power correct incorrect

There is no room for error correct incorrect

is more applicable in less developed economies correct incorrect

is applicable when goods have well-established brand names correct incorrect

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In the perfect competition model buyers are assumed ____________

to be price makers correct incorrect

to have perfect knowledge of prices correct incorrect

to have only small sums of money correct incorrect

to prefer advertised goods correct incorrect

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For the perfectly competitive firm ____________.

price equals average variable cost correct incorrect

price influences the amount a firm may sell correct incorrect

price is determined by the firm's profit-maximizing behaviour correct incorrect

price equals marginal revenue correct incorrect

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The profit-maximizing firm produces at a level of output where ____________

total revenue equals total cost correct incorrect

The marginal cost curve intersects the marginal revenue curve from below correct incorrect

average revenue equals total cost correct incorrect

the difference between marginal revenue and total cost is greatest correct incorrect

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In the long run equilibrium, the exit of firms in an industry only stops when ____________

Firms enter into partnerships correct incorrect

Profits increase correct incorrect

The firms that remain are able to cover their total costs correct incorrect

The government directs firms not to close down correct incorrect

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In a perfectly competitive industry the firms produce

an identical product correct incorrect

the full range of products correct incorrect

products of perfect quality correct incorrect

None of the above correct incorrect

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Which of the following is not an assumption of perfect competition?

Buyers are well informed about the characteristics of the product being sold correct incorrect

There is freedom of entry to the industry correct incorrect

All the firms in the industry sell a heterogeneous product correct incorrect

There is freedom of exit from the industry correct incorrect

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The break-even price can also be called the ____________.

Shut down price correct incorrect

Exit price correct incorrect

Neutral price correct incorrect

Indifferent price correct incorrect

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Which of the following products is most likely to be sold in a perfectly competitive market?

Treatment for heart disease correct incorrect

Internet access correct incorrect

'4x4' cars. correct incorrect

Wheat of a particular standard type. correct incorrect

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Consumers' surplus is ____________

the total value that consumers place on all the units of a product that they consume correct incorrect

the difference between the total value that consumers place on all the units of a product that they consume and the price they pay. correct incorrect

the total value placed on their consumption of a product by all consumers except the marginal consumer. correct incorrect

the total value that consumers place on all the units they consume of a product minus the total cost of producing that output. correct incorrect