Which of the following is not a characteristic of perfect competition? Large num

Question

Which of the following is not a characteristic of perfect competition? Large number of firms in the industry. Outputs of the firms are perfect substitutes for one another. Firms face downward-sloping demand functions. No barriers to entry or exit. 10If a market is perfectly competitive and is in long-run equilibrium, which of the following conditions does not hold? Price is equal to the minimum long-run average cost of production. Economic profit equals zero. The value of the last unit of output produced is equal to the value of the resources used to produce it. There is an incentive for additional firms to enter the market because existing firms are earning revenues in excess of the explicit costs of production. 11All of the following are possible characteristics of a monopoly except: there is a single firm. the firm is a price taker. the firm produces a unique product. the existence of some advertising. 12In its effort to maximize economic profit, a firm characterized as a price setter must determine: only the price it should charge. only the quantity it should produce. both the price it should charge and the quantity it should produce. neither the price it should charge and the quantity it should produce as these are both determined by forces beyond the firm's control.

Explanation / Answer

Which of the following is not a characteristic of perfect competition?

Firms face downward-sloping demand functions. This is not a characteristic of a competitive firm. The demand would be horizontal, which means it is perfectly elastic. The firm in a competitive industry can sell only at the market price.

10 If a market is perfectly competitive and is in long-run equilibrium, which of the following conditions does not hold?

There is an incentive for additional firms to enter the market because existing firms are earning revenues in excess of the explicit costs of production. This is the correct answer. As the P = AC, firms do make only normal profit and it is not incentive for new firms to enter the industry.

11 All of the following are possible characteristics of a monopoly except:

the firm is a price taker. A monopolist is a price maker, whereas, a competitive firm is a price taker. The monopolist faces a downward sloping demand curve where he can sell more by lowering the price.

12.In its effort to maximize economic profit, a firm characterized as a price setter must determine:

both the price it should charge and the quantity it should produce.

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