Economics and Perfectly Competitive Firm

Topics: Economics, Microeconomics, Supply and demand Pages: 15 (2388 words) Published: December 16, 2013
CHAPTER 9—PERFECT COMPETITION HOME WORK

1.Market structure is determined by the
a.
volume of discounts, the quantity of foreign exchange, and the effects of Federal Reserve policy b.
influence of government policy, the number of qualified buyers, and the effect of generally accepted accounting principles c.
number of buyers and sellers, whether the product is standardized, whether there is free entry and exit, and how well informed the buyers and sellers are about the market d.
volume of discounts, the effect of generally accepted accounting principles, and Federal Reserve policy e.
influence of government policy, the quantity of foreign exchange, and the effects of Federal Reserve policy

2.The number of sellers in a market is considered to be large when a.
the total exceeds 100
b.
no single buyer can affect the price through his or her demand for the product c.
they cannot be easily counted
d.
no single seller can affect the price by changing its level of output e.
no seller controls more than 20 percent of the total market supply

3.Which of the following is not a basic characteristic of a perfectly competitive market? a.
a large number of buyers and sellers
b.
significant nonprice competition among firms
c.
a standardized product produced by firms
d.
no barriers to entry
e.
no barriers to exit

4.Firms in a perfectly competitive market cannot influence a.
the quantity of the good that they produce
b.
how much labor to use in production
c.
how much capital to employ in production
d.
the level of advertising that they use
e.
the price of the product they sell

5.Firms are assumed to be price takers in a perfectly competitive market because a.
they are not allowed by law to charge any price other than the market price b.
they must accept any price offered by consumers
c.
they earn high enough profits at the market price, so they do not want to hurt consumers by raising their prices d.
each firm is too small to influence the market price
e.
there are too few buyers in the market to absorb price changes

6.Which of the following is a characteristic of perfect competition? a.
easy entry into or exit from the market
b.
a small number of buyers
c.
a high degree of government regulation
d.
a differentiated product
e.
a high degree of collusion

7.Which of the following would prevent a market from being classified as perfectly competitive? a.
there are many buyers and sellers in the market
b.
it is easy for new firms to enter the market
c.
it is easy for existing firms to exit the market
d.
buyers perceive significant differences among the products of different sellers e.
each buyer purchases only a tiny fraction of the total market quantity

8.Under perfect competition
a.
the only major difference between firms is the mark-up they use to determine prices b.
a single seller sets the price
c.
a small number of sellers offer a differentiated product
d.
sellers offer a standardized product
e.
a small number of buyers and sellers negotiate the market price

9.Under perfect competition,
a.
a single seller sets the price
b.
sellers can easily enter or exit the market
c.
a small number of sellers offer differentiated products
d.
a government franchise protects sellers
e.
an intense rivalry between two powerful firms determines the market price

10.If one firm sets the market price
a.
the market is perfectly competitive
b.
the market is not perfectly competitive
c.
there are a large number of buyers who can buy from a wide range of competitors d.
there is free entry into the market
e.
its product must be a standardized commodity, produced by many competitors

11. Adam Smith’s theory of competition
a. was identical to perfect competition
b. was one in which all firms were seen as actively seeking to expand their respective market shares
c. was such that price...
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