Perfect Competition

In a perfectly competitive market, what is the demand curve faced by an individual firm?

• Downward sloping

• Upward sloping

• Vertical line

• Horizontal line

What is the profit-maximising output level for a perfectly competitive firm?

• Where total cost is minimized

• Where total revenue is maximized

• Where average revenue is highest

• Where marginal revenue equals marginal cost

What type of profits does a perfectly competitive firm earn when total revenue exceeds total costs?

• Subnormal profits

• Normal profits

• Zero profits

• Supernormal profits

In the short run, when does a perfectly competitive firm earn normal profits?

• When total revenue exceeds total cost

• When total revenue is maximized

• When total revenue is less than total cost

• When total revenue equals total cost

What happens to a perfectly competitive firm when total revenue is less than total costs in the short run?

• It earns normal profits

• It earns supernormal profits

• It earns subnormal profits

• It breaks even

What is the main characteristic of a perfectly competitive firm's demand curve?

• Downward sloping

• Horizontal line

• Vertical line

• Upward sloping

What is the condition for a perfectly competitive firm earning subnormal profits to continue production in the short run?

• Total Revenue (TR) is greater than Total Variable Cost (TVC)

• Total Revenue (TR) is equal to Total Cost (TC)

• Total Revenue (TR) is less than Total Cost (TC)

• Average Revenue (AR) is greater than Average Cost (AC)

In a perfectly competitive market, what is the condition for allocative efficiency to be achieved?

• Price (P) is equal to Average Cost (AC)

• Price (P) is less than Marginal Cost (MC)

• Price (P) is greater than Marginal Cost (MC)

• Price (P) is equal to Marginal Cost (MC)

Why do perfectly competitive firms lack dynamic efficiency?

• High barriers to entry in the market

• Limited access to technology

• Lack of incentive and ability to engage in research and development

• Government regulations restricting innovation

What is the outcome if a perfectly competitive firm's Total Revenue (TR) is less than Total Variable Cost (TVC) in the short run?

• The firm should increase production

• The firm should reduce fixed costs

• The firm should continue production

• The firm should stop production