Micro: Perfect Competition (PC)

In a perfectly competitive market, what factor ensures that no individual firm is large enough to affect the market?

• There are a large number of sellers
• The product is homogeneous
• Firms can enter and exit easily
• There is perfect information

What is an example of a homogeneous product mentioned in the transcript?

• Milk
• Bread
• Cereal
• Cheese

What does a perfectly competitive firm have no control over?

• The price it can charge
• The quality of its product
• The advertising strategies it can use
• The quantity of output it can produce

What is the level of output at which a perfectly competitive firm maximizes profit?

• Where marginal revenue equals marginal cost
• Where marginal revenue is higher than marginal cost
• Where average revenue is maximum
• Where total revenue is maximum

In the long run, what happens to a perfectly competitive firm's profits?

• They are always equal to zero
• They are dependent on market demand
• They increase exponentially
• They fluctuate unpredictably

What determines the prevailing price for each firm in a perfectly competitive market?

• Market supply and market demand
• Advertising strategies
• Industry demand
• Government regulations

What is the equilibrium price that a perfectly competitive firm is forced to accept?

• P*
• P-
• P+
• P/

In a perfectly competitive market, what is the level of output that maximizes profit?

• Where marginal revenue equals the price
• Where total revenue is maximum
• Where price is highest
• Where average cost is lowest

What happens to profits in the short run for a perfectly competitive firm?

• They can be positive
• They remain constant
• They are zero
• They are always negative

What ultimately happens to profits in the long run for a perfectly competitive firm?

• They reduce to zero
• They stabilize at a certain level
• They increase indefinitely
• They depend on government intervention