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    Chapter 14

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    This document provides a summary of key concepts related to firms operating in competitive markets: 1) Perfect competition involves identical goods while monopolistic competition involves differentiated goods. 2) Perfect competition is characterized by many small firms that find it difficult to earn economic profits in the long run. 3) Advertising is not considered a characteristic of perfect competition. 4) A monopoly has the fewest number of firms in a market. 5) Under perfect competition, determining output levels to maximize profits is a short run decision.

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    Chapter 14

    Uploaded by

    abu.toyab
    14 views2 pages
    This document provides a summary of key concepts related to firms operating in competitive markets: 1) Perfect competition involves identical goods while monopolistic competition involves differentiated goods. 2) Perfect competition is characterized by many small firms that find it difficult to earn economic profits in the long run. 3) Advertising is not considered a characteristic of perfect competition. 4) A monopoly has the fewest number of firms in a market. 5) Under perfect competition, determining output levels to maximize profits is a short run decision.

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    This document provides a summary of key concepts related to firms operating in competitive markets: 1) Perfect competition involves identical goods while monopolistic competition involves differentiated goods. 2) Perfect competition is characterized by many small firms that find it difficult to earn economic profits in the long run. 3) Advertising is not considered a characteristic of perfect competition. 4) A monopoly has the fewest number of firms in a market. 5) Under perfect competition, determining output levels to maximize profits is a short run decision.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Download as docx, pdf, or txt
    14 views2 pages

    Chapter 14

    Uploaded by

    abu.toyab
    This document provides a summary of key concepts related to firms operating in competitive markets: 1) Perfect competition involves identical goods while monopolistic competition involves differentiated goods. 2) Perfect competition is characterized by many small firms that find it difficult to earn economic profits in the long run. 3) Advertising is not considered a characteristic of perfect competition. 4) A monopoly has the fewest number of firms in a market. 5) Under perfect competition, determining output levels to maximize profits is a short run decision.

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    Chapter -14: Firms in competitive market

    1. Which of the following is a point of difference between perfect and monopolistic competition?
    a. In perfect competition, the firms produce goods that are identical in all aspects, but under
    monopolistic competition, the goods are not identical
    b. There are many barriers to entry in perfect competition but monopolistic competition does not
    have any such problems
    c. There are many barriers to entry in monopolistic competition but perfect competition does not
    have any such problems
    d. Under perfect competition, there are many firms of relatively smaller size, but that is not the
    case for monopolistic competition

    Answer: a

    2. The market type which is known as perfect competition is __________.


    a. Highly competitive and companies find it challenging to earn economic profits in the long run
    b. Almost free from competition and companies earn large profits
    c. Marked by firms continuously trying to upgrade their products so that buyers prefer their
    products to that of their competitors’
    d. Dominated by fierce advertising campaigns

    Answer: a

    3. Which of the following factors is not a characteristic of perfect competition?


    a. A large number of buyers and sellers
    b. Well-informed buyers and sellers about product prices
    c. Individual firms spend a considerable amount on advertising
    d. No restrictions on entry into or exit from the industry

    Answer: c

    4. Which of the following markets have the fewest number of firms?


    a. Monopoly
    b. Perfect competition
    c. Oligopoly
    d. Monopolistic competition

    Answer: a

    5. Under perfect competition, a business has to make different types of decisions, both for the short
    run and the long run. Which of the following is a short run decision?
    a. Whether to enter or exit an industry
    b. The price to charge buyers for a product
    c. Spending on advertising and sales promotion
    d. The levels of output that can maximise profits

    Answer: d
    6. If many sellers are selling an identical product, what is the implication of this scenario?
    a. Significant losses for all the sellers
    b. The market supply curve is horizontal
    c. Chaos in the market
    d. The sellers do not have the power to change the price of a product

    Answer: d

    7. Which of the following is true if the demand for a seller’s product is perfectly elastic?
    a. The seller will not be able to sell any output if they try to price their product above the market
    price
    b. The market has many substitutes for a seller’s product
    c. The seller has zero incentive to sell their product below the market price
    d. All of the above

    Answer: d

    8. Which of the following is true about a price-taking firm?


    a. It is in contact with rival firms to fix the best price that all of them can charge
    b. It is unable to influence the price of the product that it sells
    c. It is asking the government to set a fixed price for its product
    d. It can set the price of a product at any level that it wants

    Answer: b

    9. Which of the following is a barrier to entry?


    a. A government regulation that restricts a monopoly firm from earning an economic profit
    b. A rule or regulation that protects a firm from new competitors arriving in the market
    c. The presence of firms within a market that are incurring economic losses, something that
    deters new companies from entering
    d. Anything that establishes a barrier to the expanding of output within a market

    Answer: b

    10. Which of the following will create a natural monopoly in the market?
    a. A technology that helps a firm to produce at a lower average cost than two or more firms
    b. A requirement for a government license before a firm can sell the product or service
    c. The ownership of all available units that are required for the raw materials
    d. Any exclusive right granted to a firm for supplying a product or service

    Answer: a

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