CHAPTER 08 - Perfect Competition 1. Commodity products are a. pasteurized b. bla
ID: 1123815 • Letter: C
Question
CHAPTER 08 - Perfect Competition 1. Commodity products are a. pasteurized b. bland c. perceived by consumers to be identical d. made by one manufacturer e. made by hand 2. Perfectly competitive firms respond to changing market conditions by varying their a. price b. output c. market share d. information e. advertising campaigns 3. Which of the following is likely to be present in a perfectly competitive market? a. patents b. government licenses c. nonprice competition such as advertising d. high capital costs e. firms producing identical products 4. Firms in perfect competition have no control over a. all of the following b. where to operate on their average total cost curves c. what price to charge d. how many inputs to use e. how much to produce 5. Because market price remains constant as a perfectly competitive firm expands output, each firr faces a. a downward-sloping demand curve b. a horizontal demand curve c. constant returns to scale d. constant costs e. diminishing marginal revenue maximize 6. Economic theory assumes that the goal of firms is to a. sales b. total revenue c. profit d. price e. utilityExplanation / Answer
Perfect Competition: Perfect Competition is a form of market structure in which there is free entry and exit of firms and firms are selling homogeneous and identical products in the market. Firms under this form of market are price takers rather than price makers. Industry determines the equilibrium price from the demand and supply curve intersection. Sellers can sell any unit of commodity at that price and firms does not have any price control over the commodity. If one seller try to charge higher price then it will lose all his customers because all firms are selling similar products in every respect like color, shape, brand, etc.
1. c) perceived by consumers to be identical
2. b) output
3. e) firms producing identical products
4. c) what price to charge
5. b) horizontal demand curve
6. a) sales
Monopoly is a form of market in which there exist only a single seller who sold goods which does not have close substitutes. There is barrier in the entry of new firms. Under monopoly, the firm is a price maker because it can fix the price for its product. It has free control over the supply of the product. A monopolist firm faces a market demand curve which is negatively sloped. It means that the firm will have to reduce the price to increase its sale. Demand curve of a firm under monopoly is less elastic because the product has no close substitutes. Railways in India are a monopoly industry of the Government of India. Since, there is only one producer of a product in the market, the distinction between firm and industry disappears.
1. e) a single seller of a product with no close substitutes.
2. c) identical to the market demand curve