1. In a perfectly competitive market, ________. there are barriers that make it
ID: 2813745 • Letter: 1
Question
1. In a perfectly competitive market, ________.
there are barriers that make it difficult for firms to enter
no one seller can influence the price of the product
prices are falling at every level of output
average revenue exceeds marginal revenue for each unit sold
2. Which of the following characteristics does NOT apply to perfectly competitive markets?
Companies can enter and exit the market easily.
Sellers in the market are price-takers.
The number of buyers and sellers is small.
Buyers and sellers have complete information about the identical products of all competing companies.
3. Marginal cost is ________.
a change in total costs from a single-unit change in quantity
a change in total revenue from a single-unit change in quantity
a change in total costs from a multiple-unit change in quantity
a change in total revenue from a multiple-unit change in quantity
4. When a manager chooses to produce a quantity where marginal revenue exceeds marginal cost, ________.
the company is losing money
the company's marginal revenue is falling
the company is not earning all the profit that it can
the company is earning all the profit that it can
Explanation / Answer
1. In a perfectly competitive market, no one seller can influence the price of the product
Reason : All the other options are Incorrect. A perfectly competetive market is recognized where neither seller or buyer can influence the price, there are no barriers to entry / exit, prices are same at all levels of output and Average revenue and Marginal revenue are equal and there are large no of buyers and sellers.
2. The number of buyers and sellers is small. does not apply to a perfectly competetive market.
Reason : All the other options are characterstics of a perfectly competitive market. A perfectly competetive market is recognized where neither seller or buyer can influence the price and thus both are price takers, there are no barriers to entry / exit, prices are same at all levels of output and Average revenue and Marginal revenue are equal and there are large no of buyers and sellers.
3. Marginal Cost is Change in total costs from a single unit change in quantity
Reason : Marginal cost is defined as additional cost incurred due to production of one more additional quantity. Hence this option was choosen.
4. When a manager chooses to produce a quantity where marginal revenue exceeds marginal cost, the company is not earning all the profit it can,
Reason : Marginal Revenue is defined as the additional revenue due to one more unit while marginal cost is defined as the additional cost due to one more unit. If marginal revenue is more than marginal cost at any level, it means that the company can make more money by producing more units. Thus it can be said that at that level, the company is not earning all the profit it can.
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