Podcast
Questions and Answers
In a perfect competitive market, why is the demand curve perfectly elastic?
In a perfect competitive market, why is the demand curve perfectly elastic?
- Because firms have perfect knowledge in the market
- Because there are many buyers and sellers
- Because the price is set by the market
- Because firms cannot raise their prices without losing demand (correct)
Why are firms in a perfect competitive market considered 'price takers'?
Why are firms in a perfect competitive market considered 'price takers'?
- Because they produce homogenous products
- Because they can raise prices without affecting demand
- Because the market sets the price and firms must accept it (correct)
- Because they set the prices for their products
What condition must firms in a perfect competitive market meet to make normal profit in the long run?
What condition must firms in a perfect competitive market meet to make normal profit in the long run?
- Produce at the point where Marginal Revenue (MR) equals Marginal Cost (MC) (correct)
- Produce at the point where Marginal Cost (MC) equals Average Revenue (AR)
- Produce at the point where Marginal Revenue (MR) equals Average Revenue (AR)
- Produce at the point where Average Revenue (AR) equals Average Cost (AC)
What does the equality between Marginal Revenue (MR) and Marginal Cost (MC) determine for firms in a perfect competitive market?
What does the equality between Marginal Revenue (MR) and Marginal Cost (MC) determine for firms in a perfect competitive market?
Why do firms in a perfect competitive market produce where Marginal Revenue (MR) equals Marginal Cost (MC)?
Why do firms in a perfect competitive market produce where Marginal Revenue (MR) equals Marginal Cost (MC)?
In a perfect competitive market, what happens to abnormal profit in the long run?
In a perfect competitive market, what happens to abnormal profit in the long run?
What would happen to a firm in a perfect competitive market that tries to raise its prices above the market price?
What would happen to a firm in a perfect competitive market that tries to raise its prices above the market price?
Why does a firm in a perfect competitive market set its production level where MR=MC?
Why does a firm in a perfect competitive market set its production level where MR=MC?
What happens to firms making abnormal profits in the long run in a perfect competitive market?
What happens to firms making abnormal profits in the long run in a perfect competitive market?
Why do firms in a perfect competitive market produce at a point where MR=MC?
Why do firms in a perfect competitive market produce at a point where MR=MC?
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