Question

If MC = MR, then a perfectly competitive firm is:

Question 1 options:

a)	maximizing profit.

b)	making a normal rate of profit.

c)	making economic losses.

d)	making economic profits.

In which market structure is interdependent decision making most likely to occur among the firms?

Question 2 options:

a)	perfect competition

b)

oligopoly

c)	monopolistic competition

d)

monopoly

The perfectly competitive market structure assumes all of these EXCEPT:

Question 4 options:

a)	ease of entry and exit.

b)	identical products.

c)	zero economic profit in the long run.

d)	a small number of buyers and sellers.

At the shut-down point, the:

Question 6 options:

a)	firm is making a normal profit.

b)	firm is making an accounting profit.

c)	industry will attract new entrants.

d)	firm is indifferent to whether it operates or shuts down.

Which of these would be associated with perfect competition in a market?

Question 7 options:

a)	a market in which firms sell their product at the market equilibrium price

b)	a market in which firms are impacted significantly by the actions of the other firms

c)	a market with many sellers, with each producing a similar though not identical version of a product

d)	a market with high costs of entry into the industry

Answer 1

1.
The answer is a)
maximizing profit.
If MC = MR, then a perfectly competitive firm is maximizing profit since P=MR
2.
The answer is b)
oligopoly
In an oligopoly market the firms dependent on each other for making decision.
3.
The answer is d)
a small number of buyers and sellers.
A perfectly competitive market has a large number of buyers and sellers.
4.
The answer is d)
At the shut down point the firm has the option to continue operating making losses or to shut down.
firm is indifferent to whether it operates or shuts down.