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Commerce and BusinessbackBusinessbackPrinciples of EconomicsbackEconomicsbackPractice Set 2495back

Competitive Markets

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Question 1
Free
Multiple Choice

Which of the following is NOT a determinant of market structure?

Choose correct answer/s
A

The number of sellers.

B

The nature of the product.

C

The ease of entering the industry.

D

The capital-labour ratio of the firm.

E

The market share of the sellers.

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Question 2
Free
Multiple Choice

The term "perfect competition" refers to

Choose correct answer/s
A

rivalrous behaviour.

B

ideal economic behaviour.

C

a type of market structure.

D

the most prevalent market structure in a capitalist economy.

E

the most realistic market structure.

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Question 3
Free
Multiple Choice

In economics,perfect competition refers to a market structure where

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A

firms behave strategically.

B

all firms are earning profits.

C

firms co-operate with each other.

D

each firm has zero market power.

E

firms can set the price of their product.

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Question 4
Free
Multiple Choice

A firm is said to have "market power" only when

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A

it has the ability to influence the price of its product.

B

it has the ability to choose its own profit-maximizing level of output.

C

its demand curve is the market demand curve.

D

it is one of 10 or fewer firms in the industry.

E

it is one of 25 or fewer firms in the industry.

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Question 5
Free
Multiple Choice

The theory of perfect competition is built on several assumptions,including that

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A

the individual firm can affect the price of the product it sells.

B

the individual firm can influence demand by advertising.

C

each firm must earn economic profits to remain in the industry.

D

any firm can easily enter or leave the industry.

E

there are few producers of an identical product.

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Question 6
Multiple Choice

An example of a product that could most closely satisfy the homogeneous product assumption of perfect competition is

Choose correct answer/s
A
barley.
B
cars.
C
shampoo.
D
personal computers.
E
pizza.
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Question 7
Multiple Choice

Which of the following statements does NOT apply to a perfectly competitive market?

Choose correct answer/s
A
There is freedom of entry and exit of firms in the industry.
B
Consumers can shop for the lowest available price.
C
Consumers prefer certain brands over others.
D
All firms have realized the possible economies of scale.
E
All firms in the industry are price takers.
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Question 8
Multiple Choice

If a firm in a perfectly competitive market were to raise its price,its

Choose correct answer/s
A
revenue would decrease only if market demand were elastic.
B
revenue would increase only if market demand were inelastic.
C
total costs would increase.
D
revenue would fall dramatically.
E
profits would increase as long as costs remained constant.
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Question 9
Multiple Choice

Given the usual assumptions about perfect competition,a perfectly competitive firm

Choose correct answer/s
A
can set the price it charges.
B
can sell as much of its product as it wishes at the market price.
C
can affect the market conditions in a significant way.
D
is aware of its competitors' costs.
E
competes actively with other sellers in the industry.
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Question 10
Multiple Choice

A firm in a perfectly competitive market

Choose correct answer/s
A
has no power to influence the market price.
B
is limited in the amount of product it can sell without affecting the price.
C
is dependant upon the behaviour of its competitors.
D
is aware of its competitors' costs.
E
competes actively with other sellers in the industry.
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Question 11
Multiple Choice

The conditions for a perfectly competitive market include which one of the following?

Choose correct answer/s
A
Firms behave as price takers.
B
Profits are zero in the short run.
C
New entrants cannot threaten the position of existing firms.
D
Firms can control prices.
E
Firms must employ the newest technologies as soon as they are developed.
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Question 12
Multiple Choice

In order to decide the appropriate output to produce,the manager of a perfectly competitive firm needs to know

Choose correct answer/s
A
the industry or market demand.
B
the industry or market supply.
C
what other firms in the industry are producing.
D
the prevailing market price for the firm's output.
E
its competitors' market strategies.
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Question 13
Multiple Choice

When economists say that a firm is a "price taker" they mean that

Choose correct answer/s
A
the firm initially takes price as given and tries to influence it through advertising.
B
the firm can alter its rate of production and sales without affecting the market price of the product.
C
at the price prevailing in the market,the firm will be willing to sell an infinite quantity.
D
the demand curve that the firm faces is perfectly inelastic.
E
the firm can alter the market price as it changes its rate of production.
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Question 14
Multiple Choice

Which of the following producers operate in a market structure closely approximated by perfect competition?

Choose correct answer/s
A
a restaurant in your neighbourhood
B
Air Canada
C
a Safeway grocery store
D
A British Columbia peach grower.
E
the Bank of Montreal
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Question 15
Multiple Choice

Which of the following statements is one of the assumptions of the theory of perfect competition?

Choose correct answer/s
A
Firms compete with each other by varying their price.
B
Firms are price setters.
C
Consumers know the prices charged by each firm.
D
Firms produce a wide variety of versions of the product.
E
A firm's entry to the market is regulated by the federal Competition Bureau.
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Question 16
Multiple Choice

Suppose XYZ Corp.is a profit-maximizing firm that is producing and selling 1 billion disposable wooden chopsticks per month at a price of $0.04 per unit.Further,suppose market demand for this product is 1.5 billion units per month.What can we conclude about market structure in this case?

Choose correct answer/s
A
This is not a perfectly competitive market because XYZ Corp.is small relative to the size of the industry.
B
This is not a perfectly competitive market because XYZ Corp.is selling its product at a price that is not equal to marginal cost.
C
This is a perfectly competitive market because there is freedom of entry and exit in the industry.
D
This is a perfectly competitive market because the product is homogeneous.
E
This is not a perfectly competitive market because XYZ Corp.is large relative to the size of the industry.
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Question 17
Multiple Choice

Why will a perfectly competitive firm not sell its product below the prevailing market price?

Choose correct answer/s
A
It faces inelastic demand.
B
It can sell all it wishes at the market price.
C
The sellers in the market have agreed to not sell below a specified price.
D
Its costs would increase dramatically.
E
This would lead to a price war among sellers.
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Question 18
Multiple Choice

The price elasticity of demand faced by an individual wheat farmer would come closest to which following value?

Choose correct answer/s
A
0.00007
B
0.7
C
1.0
D
71.0
E
71 000
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Question 19
Multiple Choice

Which of the following terms would best describe the price elasticity of demand facing a perfectly competitive firm?

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A
perfectly inelastic
B
inelastic
C
unit
D
elastic
E
perfectly elastic
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Question 20
Multiple Choice

The demand curve facing a perfectly competitive firm

Choose correct answer/s
A
is the same as the industry or market demand curve.
B
is almost perfectly elastic at the market price.
C
depends on the firm's technology.
D
depends on the firm's costs of production.
E
depends on the firm's output.
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