Unit 10: Market Structure

1. Which one is the characteristic of perfect competition?

• 1. It has a large number of buyers and sellers selling homogeneous products at a uniform price.

• 1. There is no free entry and exit for all the firms.

• 1. It has a large number of buyers and sellers where the government decides the price of the product.

• 1. It has a large number of buyers and sellers selling heterogeneous products at a uniform price.

Which of the following options is NOT the characteristics of the perfect competition market?

• 1. Sellers selling homogeneous products.

• 1. Free entry and exit for the firms.

• 1. No intervention by the government.

• 1. Sellers spend a huge amount of money on advertising.

Sellers in perfect competition are

• price makers

• price takers

What will happen if the sellers increase the prices of their products in perfect competition market?

• 1. The seller will make a lot of profit.

• 1. All the customers of the seller will rush to its competitors’ firms because they can get the same product at a lower price.

• 1. Buyers don’t have an option to buy the same product.

In perfect competition, how are the prices of goods and services decided?

• 1. Demand and supply forces decide the prices of goods and services.

• 1. The seller decides the prices of goods.

• 1. Government influences the prices of goods.

• 1. Buyers control the price level by influencing demand for the products.

How is the demand curve in a perfectly competitive market?

• 1. The demand curve is a horizontal line at the market price.

• 1. The demand curve is a vertical line at the market price.

• 1. The demand curve is flat.

A perfectly competitive firm should shut down in the short run if market price is

• 1. greater than average total cost

• 1. less than average total cost

• 1. greater than average variable cost

• 1. less than average variable cost

The short-run supply curve of a perfectly competitive firm

• 1. is equal to that portion of the short-run marginal cost curve that is above the average variable cost curve

• 1. is equal to that portion of the short-run marginal cost curve that is above the average total cost curve

• 1. is equal to that portion of the short-run average total cost curve that is above the average variable cost curve

• 1. None of the above is correct

When a perfectly competitive industry is in long-run equilibrium, all firms in the industry

• 1. produce a level of output where short-run marginal cost is equal to short-run average total cost

• 1. earn zero economic profits

• 1. produce a level of output where long-run marginal cost is equal to long-run average cost

Marginal revenue is equal to price for which one of the following types of market structure?

• Monopoly

• Perfect competition

• Oligopoly

• Monopolistic competition