Question

Süppose Bright Bright Both use Strategysrkle agree to collude and jointly maximine th rolfits The b straey is C. Bright uses "Strategy 1" while Sparkle uses -Sategy- D. Bright uses "Strategy 2th while Sparkle always uses "Stratey 15. If Sparkle uses the Strategy 2,- what strategy A. Bright uses Strategy should Bright use? B. Bright uses "Strategy 2. 1 C. Bright uses both Strategy 1- and "Strategy D. It doesn't matter what strategy Bright uses 16. Which of the following is NOT a characteristic of a perfectly competistive marker? A. There are many buyers and sellers in the market B. The goods offered for sale are largely the same. C. Firms can freely enter or exit the market D. Firms generate small but positive economic profits in the long run 17. Which of the following products is likely in a perfectly competitive market? A. salt B. electricity C. cable television D. soda 18. For a perfectly competitive firm, its marginal revenue is: A. equal to the price of the good sold. B. average revenue divided by the quantity sold C. total revenue divided by the price. D. equal to the quantity of the good sold 19. A perfectly competitive firm maximizes profit when it produces output up to the point where: A. marginal cost equals total revenue. B. marginal revenue equals average revenue. C. marginal cost equals marginal revenue. D. price equals average variable cost. 20. The demand curve for a product produced in a perfectly competitive firm is normally: A. a vertical line. B. an upward-sloping curve. C. a horizontal line. D. a downward-sloping curve. 21. If a perfectly competitive firm is producing a level of output where marginal cost exceeds revenue, then the firm could increase profit if it: A. reconsiders past production decisions. B. decreases production. C. increases production D. holds production constant 22. In the short run, a perfectly competitive firm's supply curve is the: B. portion of the marginal-cost curve that lies above the average-total-cost curve. D. upward-sloping portion of the average-total-cost curve. A. entire marginal-cost curve. C. portion of the marginal-cost curve that lies above the average-variable-cost curve

Answer 1

16) D) firms generate small but positive profit in the long run.

Perfectly competitive firms earns zero profit in the long run. They sell identical products in the market if they earn positive profit then new firms enter in the market and reduces profit of each firm to zero.

17) A) Salt

Perfect Competition is a market structure with free entry and exit of firms and firms are selling homogeneous and identical products in the market. Firms are price takers rather than price makers. Industry determines the equilibrium price from the demand and supply curve intersection. Sellers can sell any unit of commodity at that price and firms does not have any price control over the commodity. If one seller try to charge higher price then it will lose all his customers because all firms are selling similar products in every respect like color, shape, brand, etc.

18) A) equal to the price of the good sold

Under perfect competition, P = Average Revenue = Marginal Revenue of firm. Demand curve is horizontal line.

19) C) marginal cost equals marginal revenue

Profit is maximised where P = MC and P = MR under perfect competition so it can be written as MR = MC.

20. C) a horizontal line

Under perfect competition, price is determined by the industry and remains fixed so curve is horizontal.

21. B) Decrease production

Decrease in production decreases MC which reduces loss which is occurring.

22. C) portion of the marginal cost curve that lies above the average variable cost curve.