Question : 11) The conditions for a perfectly competitive market include which : 1384221

11) The conditions for a perfectly competitive market include which one of the following?

A) Firms behave as price takers.

B) Profits are zero in the short run.

C) New entrants cannot threaten the position of existing firms.

D) Firms can control prices.

E) Firms must employ the newest technologies as soon as they are developed.

12) In order to decide the appropriate output to produce, the manager of a perfectly competitive firm needs to know

A) the industry or market demand.

B) the industry or market supply.

C) what other firms in the industry are producing.

D) the prevailing market price for the firm’s output.

E) its competitors’ market strategies.

13) When economists say that a firm is a “price taker” they mean that

A) the firm initially takes price as given and tries to influence it through advertising.

B) the firm can alter its rate of production and sales without affecting the market price of the product.

C) at the price prevailing in the market, the firm will be willing to sell an infinite quantity.

D) the demand curve that the firm faces is perfectly inelastic.

E) the firm can alter the market price as it changes its rate of production.

14) Which of the following producers operate in a market structure closely approximated by perfect competition?

A) a restaurant in your neighbourhood

B) Air Canada

C) a Safeway grocery store

D) A B.C. peach grower.

E) the Bank of Montreal

15) Which of the following statements is one of the assumptions of the theory of perfect competition?

A) Firms compete with each other by varying their price.

B) Firms are price setters.

C) Consumers know the prices charged by each firm.

D) Firms produce a wide variety of versions of the product.

E) A firm’s entry to the market is regulated by the federal Competition Bureau.

16) Suppose XYZ Corp. is a profit-maximizing firm that is producing and selling 1 billion disposable wooden chopsticks per month at a price of $0.04 per unit. Further, suppose market demand for this product is 1.5 billion units per month. What can we conclude about market structure in this case?

A) This is not a perfectly competitive market because XYZ Corp. is small relative to the size of the industry.

B) This is not a perfectly competitive market because XYZ Corp. is selling its product at a price that is not equal to marginal cost.

C) This is a perfectly competitive market because there is freedom of entry and exit in the industry.

D) This is a perfectly competitive market because the product is homogeneous.

E) This is not a perfectly competitive market because XYZ Corp. is large relative to the size of the industry.

17) Why will a perfectly competitive firm not sell its product below the prevailing market price?

A) It faces inelastic demand.

B) It can sell all it wishes at the market price.

C) The sellers in the market have agreed to not sell below a specified price.

D) Its costs would increase dramatically.

E) This would lead to a price war among sellers.

18) The price elasticity of demand faced by an individual wheat farmer would come closest to which following value?

A) 0.00007.

B) 0.7.

C) 1.0.

D) 71.0.

E) 71 000.

19) Which of the following terms would best describe the price elasticity of demand facing a perfectly competitive firm?

A) perfectly inelastic

B) inelastic

C) unit

D) elastic

E) perfectly elastic

20) The demand curve facing a perfectly competitive firm

A) is the same as the industry or market demand curve.

B) is almost perfectly elastic at the market price.

C) depends on the firm’s technology.

D) depends on the firm’s costs of production.

E) depends on the firm’s output.