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Perfect Competition Quiz

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Questions and Answers

What is a perfectly competitive market?

A market with only one seller and many buyers with no barriers to entry

A market with many sellers and buyers of a homogeneous product and no barriers to entry (correct)

A market with few sellers and buyers of a differentiated product and high barriers to entry

A market with one dominant seller and many buyers with some barriers to entry

What is the defining characteristic of a perfectly competitive market?

High barriers to entry

Homogeneous product (correct)

Dominant seller

Few sellers

What is the short-run supply curve for a perfectly competitive firm?

The portion of the average total cost curve that lies above the marginal cost curve

The portion of the marginal cost curve that lies above the average total cost curve

The portion of the average variable cost curve that lies above the marginal cost curve

The portion of the marginal cost curve that lies above the average variable cost curve (correct)

What is the long-run supply curve for an increasing-cost industry?

Sloping upward Signup and view all the answers

What happens in the long run if there is an increase in demand in a perfectly competitive market?

New firms enter the market, increasing supply and lowering prices Signup and view all the answers

In a perfectly competitive market, what is the defining characteristic of the product being sold?

Homogeneous product Signup and view all the answers

What is the primary factor that distinguishes a perfectly competitive market from other market structures?

Presence of many sellers and buyers Signup and view all the answers

What is the typical number of firms in a perfectly competitive market?

Hundreds or even thousands Signup and view all the answers

What is the key characteristic of the entry into a perfectly competitive market?

No barriers to entry Signup and view all the answers

What is the impact of economic profit in the long run for firms in a perfectly competitive market?

Economic profit attracts new firms, increasing competition and reducing profit Signup and view all the answers