Question

Question 1: In a competitive industry

a. firms produce a product or service with very close substitutes

b. the firms products have a very elastic demand

c. the firms have many rivals

d. all of the above

Question 2: In the long-run, a perfectly competitive firm will achieve

a. An average rate of return

b. Economic Profits

c. Above average profits

d. Losses

Question 3: In a competitive industry

a. the industry has high barriers to entry

b. the industry has high barriers to exit

c. the industry has high barriers to entry and exit

d. the industry has no barriers to entry or exit

Question 4: A sudden fall in the market demand in a competitive industry leads to

a. A short run market equilibrium price higher than the original equilibrium

b. A market equilibrium price lower than the short run price

c. Some firms exiting the market

d. All of the above

Question 5: In a monopoly

a. the industry has high barriers to entry

b. the industry has high barriers to exit

c. the industry has no barriers to entry or exit

d. the industry has high barriers to entry and exit

Answer 1

Ans.1 Option-D

In the competitive industry the firms produce goods that are almost identical in nature and are close substitute to each other.The perfectly competitive market the demand is elastic as the  firms are price takers. The price is determined by the intersection of market demand and supply in the economy.There are multiple buyers and sellers in the competitive industry.

Ans2. Option-A

In the long run, firms earn zero economic profit from the production.They are merely able to cover the cost of production.

Ans 3. Option-D

In the competitive industry, firms are free to enter and exit at any time.
When a firm is earning profit, the other firms also enter the market and when the profits becomes zero , the firms start exiting the market.