MULTIPLE CHOICE QUESTION regarding Perfect COmpetition - Microeconomics COllege

Question

MULTIPLE CHOICE

QUESTION regarding Perfect COmpetition - Microeconomics COllege Level 1

I) Which of the following statements is correct regarding a perfectly competitive firm's total revenue?

A) The higher the price, the lower will be the total revenue.

B) The higher the price, the higher will be the total revenue.

C) When graphed, the total revenue curve is a horizontal line.

D) There is an inverse relationship between the price and the total revenue.

II Which of the following is the correct sequence of events following an increase in demand for a product in a perfectly competitive market?

A) decrease in the price and in the total profits of the representative firm which causes new firms to enter the industry.

B) An increase in the price and in the total profits of the representative firm which causes firms to leave the industry.

C) An increase in the price and in the total profits of the representative firm which causes new firms to enter the industry.

D) An increase in the price but a decrease in the total profits of the representative firm which causes firms to leave the industry.

III) Which of the following markets provide the best example of a perfect competition?

A) Automobile manufacturing.

B) Restaurants.

C) Oil refining.

D) Wheat farming.

Explanation / Answer

Q1. Answer is B. The higher the price, the higher will be the total revenue. Q2. Answer is C. An increase in the price and in the total profits of the firm which causes new firms to enter the industry. Q3. Answer is D. Wheat farming.

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