Practice Questions
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In a perfectly competitive market, what occurs at the point of market equilibrium?
At market equilibrium, the amount of goods people want to buy matches what sellers want to sell. Other options are incorrect because Some might think ...
In a perfectly competitive market, which of the following statements is true regarding price takers and market equilibrium?
In a perfectly competitive market, firms are price takers. Other options are incorrect because Some might think firms can set higher prices; It's a co...
In a perfectly competitive market, which of the following conditions must be met for the market to achieve equilibrium?
In a perfectly competitive market, all firms sell the same product. Other options are incorrect because Some might think firms can set their own price...
In a perfectly competitive market, what is the primary reason that firms are considered price takers, and how does this influence their decisions regarding market entry and exit in the presence of market failures?
Firms in a perfectly competitive market face a horizontal demand curve. Other options are incorrect because This answer suggests firms can raise price...
In a perfectly competitive market, which of the following statements best describes the relationship between market equilibrium and allocative efficiency in the long run?
In the long run, firms in a perfectly competitive market earn zero economic profits. Other options are incorrect because Some might think firms can ma...
In a perfectly competitive market, what is the primary condition for long-term equilibrium to be reached?
Firms breaking even means they are covering all their costs. Other options are incorrect because Some might think that making extra profits is good fo...
In a perfectly competitive market, what occurs at the point of market equilibrium?
At market equilibrium, the amount of goods people want to buy matches the amount available. Other options are incorrect because Some might think the p...
In a perfectly competitive market, how is the equilibrium price determined?
The equilibrium price is found where supply and demand meet. Other options are incorrect because Some might think the government sets prices; It's a c...
In a perfectly competitive market, how does a firm determine its optimal output level for profit maximization?
A firm maximizes profit by producing where its marginal cost equals marginal revenue. Other options are incorrect because Some might think raising pri...
A local farmer is producing organic tomatoes in a perfectly competitive market. Due to a sudden increase in demand, the market price for tomatoes rises. How should the farmer adjust their production to maximize profits, considering the principles of perfect competition?
The farmer should produce more tomatoes until the cost of making one more tomato is equal to the new price. Other options are incorrect because Some m...
In a perfectly competitive market, if a firm is currently producing at a level where marginal cost exceeds marginal revenue, what should the firm do to maximize profit?
When a firm's cost to make one more item is higher than the money it makes from selling that item, it loses money. Other options are incorrect because...
Which of the following statements accurately describe characteristics of a perfectly competitive market? Select all that apply.
In a perfectly competitive market, all firms sell identical products, and no single firm can set prices. Other options are incorrect because Some migh...
In a perfectly competitive market, firms are considered _____ because they have no control over the market price and must accept it as given.
In a perfectly competitive market, many firms sell similar products. Other options are incorrect because Some might think firms can set their own pric...
If a perfectly competitive firm is experiencing a decrease in market price, what is the most likely effect on the firm's output level?
When the market price drops, the firm earns less money for each item sold. Other options are incorrect because This answer suggests the firm should pr...
Arrange the following steps in the correct sequence to illustrate how a firm in a perfectly competitive market determines its output level for profit maximization:
Firms first need to know the market price. Other options are incorrect because Some might think that checking costs against revenue comes first; It's ...
In a perfectly competitive market, the relationship between price and marginal cost is similar to which of the following relationships? A: B :: C: ?
In a perfect market, price equals marginal cost. Other options are incorrect because This option confuses profit with revenue; This choice mixes up tw...
A firm in a perfectly competitive market is currently producing at a level where its marginal cost equals the market price. If the market price suddenly increases, what should the firm do to maximize its profit?
When the market price goes up, the firm can make more money by producing more. Other options are incorrect because Some might think lowering productio...
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