Ch11Practice_Test_Questions

Ch11Practice_Test_Questions - 11 C h a p PERFECT t e r...

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11 COMPETITION Competition Topic: Perfect Competition Skill: Recognition 1) Which of the following is a defining character- istic of a perfectly competitive industry? A) advertisements by well known celebrities B) persistent economic profits in the long run C) no restrictions on entry into the industry D) higher prices being charged for certain name brands Answer: C Topic: Perfect Competition Skill: Recognition 2) Which of the following is true regarding a per- fectly competitive firm? A) The firm can charge a lower price than its competitors and thereby sell more output and increase its profits. B) The firm always earns a normal profit. C) The firm’s marginal revenue continually de- creases. D) The firm’s minimum efficient scale is small relative to the market demand. Answer: D Topic: Perfect Competition Skill: Recognition 3) Which of the following is true regarding per- fect competition? I. The firms are price takers. II. Marginal revenue equals the price of the product. III. Established firms have no advantage over new firms. A) I and II. B) II and III. C) I, II and III. D) I only. Answer: C Topic: Perfect Competition Skill: Recognition 4) Which of the following is NOT an assumption of perfect competition? A) many firms B) many buyers C) restricted entry into the industry D) each firm sells an identical product Answer: C Topic: Perfect Competition Skill: Recognition 5) Which of the following is NOT an assumption of perfect competition? A) Firms compete by making their product dif- ferent from products produced by other firms. B) There are no restrictions on entry into the in- dustry. C) Established firms have no advantage over new firms. D) Sellers and buyers are well informed about prices. Answer: A 61  C h a p t e r
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6 2 C H A P T E R   1 1 Topic: Perfect Competition Skill: Recognition 6) Which of the following is NOT an assumption of perfectly competitive markets? A) many buyers and many sellers. B) no restriction on entry. C) complete information about prices. D) new entrants have higher costs. Answer: D Topic: Perfect Competition Skill: Recognition 7) Perfect competition implies that A) there are many firms in the industry. B) all firms are price takers. C) all firms are producing the same identical product. D) All of the above answers are correct. Answer: D Topic: Perfect Competition Skill: Recognition 8) A perfectly competitive industry is character- ized by A) high barriers to entry. B) firms that are price setters. C) firms facing a downward sloping demand curve. D) easy entry into the industry. Answer: D Topic: Perfect Competition Skill: Recognition 9) Perfect competition exists in an industry if A) there are many firms producing an identical product. B) there are many firms producing a similar product, each of which may have unique fea- tures.
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Ch11Practice_Test_Questions - 11 C h a p PERFECT t e r...

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