Chapter 6 Perfect Competition

6.1 Preview of the Four Market Structures

1) What is the characteristic of a perfectly competitive firm that causes it to be a price taker?

A) many buyers and sellers

B) homogeneous product

C) free entry and exit

D) A and B are correct.

2) Which of the following is NOT a characteristic of a perfectly competitive market?

A) a large number of firms in a market

B) selling a standardized product

C) substantial barriers to entry

D) an individual firm having no control over price

3) Which of the following is NOT a characteristic of a perfectly competitive market?

A) a small number of firms in a market

B) selling a standardized product

C) no barriers to entry

D) an individual firm having no control over price

4) Which of the following is a characteristic of a perfectly competitive market?

A) a large number of firms in a market

B) selling a standardized product

C) no barriers to entry

D) all of the above

5) Consumers do not have a strong preference for the output of one seller over that of another in a perfectly competitive market because

A) there a large number of firms in the market.

B) the firms sell a standardized product.

C) there are no barriers to entry.

D) an individual firm has control over price.

6) A perfectly competitive market

A) is dominated by one firm.

B) consists of at most five firms.

C) is made up of a large number of firms.

D) consists of only one firm.

7) Who are the price takers in a perfectly competitive market?

A) both the buyers and the sellers

B) the buyers

C) neither the buyers nor the sellers

D) the sellers

8) A price taker is a buyer or a seller who

A) takes the market price as given.

B) buys or sells only at a price where profits can be made.

C) accepts whatever price that the government legislates as the price of the good or service.

D) has the ability to influence the equilibrium price in the market.

9) A price maker is a buyer or a seller who

A) takes the market price as given.

B) buys or sells only at a price where profits can be made.

C) accepts whatever price that the government legislates as the price of the good or service.

D) has the ability to influence the equilibrium price in the market.

10) Firms in a perfectly competitive market

A) sell a differentiated product.

B) sell homogeneous products.

C) usually have large advertising budgets.

D) try to attract customers away from their competitors.