1) Since the assumptions of perfect competition are rarely completely satisfied

Question

1) Since the assumptions of perfect competition are rarely completely satisfied in practice, the perfectly competitive model is rarely used by economist. (TRUE/FALSE)

2) Under perfect competition, an increase in the market price will increase each firm'smarginal revenue. (TRUE/FALSE)

3) Under perfect competition, in long-run equilibrium, P = MC = ATC (TRUE/FALSE)

4) For competitive firm, profit per unit of output is equal to _____.
   A) P - ATC
   B) MC - ATC
   C) TR - TC
   D) P - AVC
   E) MR - MC

5) In a perfectly competitve market, an increase in demand will, in the long run, generally cause _____.
   A) an increase in price
   B) an increase in market output
   C) an increase in the number of firms
   D) All of these

6) Under perfect competition, the firm's supply curve is horizontal. (TRUE/FALSE)

7) Whcih of the following is a characteristic of perfect competition?
   A) There are many buyers and sellers
   B) The firm faces a downward sloping demand curve
   C) Every seller offers a different product from other sellers.
   D) All of these

8) Under perfect competition, a technology advance enabling firms to produce the same output at lower cost will cause the market supply curve to shift rightward. (TRUE/FALSE)

9) A perfectly competitive firm earns positive economic profit whenever ____
   A) P > ATC
   B) P > MR
   C) MR > P
   D) ATC > MC
   E) P > MC

Explanation / Answer

1. False

2 True

3 True

4  A) P - ATC

5  B) an increase in market output

6 True

7  A) There are many buyers and sellers

8 True

9.  A) P > ATC

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