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Multiple Choice Quiz
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1
A market with many firms selling identical products to many buyers where no firm or individual has any influence on the price of the product is known as:
A)monopoly.
B)oligopoly.
C)monopolistic competition.
D)perfect competition.
2
Which of the following is not a characteristic of perfect competition?
A)Free entry and exit of firms.
B)A firm must lower its price to increase quantity sold.
C)Buyers are assumed to have full information about the product and its price.
D)There are many buyers and sellers.
3
The additional revenue that a firm receives from selling one more unit is known as:
A)marginal revenue.
B)marginal cost.
C)marginal product.
D)marginal utility.
4
In the short run, competitive firms must choose:
A)price.
B)output and plant size.
C)price and output.
D)output.
5
Government licences, or charters, are:
A)a guarantee of profitability.
B)a barrier to entry.
C)a barrier to exit.
D)common in perfectly competitive markets.
6
The marginal revenue of a firm in a perfectly competitive industry is currently greater than its marginal cost. This firm should:
A)lower its price.
B)lower its output.
C)increase its price.
D)Increase its output.
7
In the short run, a firm in a perfectly competitive industry will produce provided that price is greater than:
A)average variable cost.
B)average total cost.
C)average fixed cost.
D)marginal cost.
8
The short-run supply curve for a perfectly competitive industry is:
A)horizontal at the current price.
B)the horizontal sum of the firms’ supply curves.
C)vertical at the current aggregated output.
D)the vertical sum of the firms’ supply curves.
9
When firms in a competitive industry are experiencing supernormal profits, they can expect:
A)existing firms to increase their output.
B)consumers to boycott their product.
C)government regulation.
D)new firms to enter the industry.
10
In the long run, firms in a perfectly competitive industry will make:
A)no profit.
B)normal profits.
C)supernormal profits.
D)losses.
11
In the long run, price in a perfectly competitive industry will equal:
A)the minimum average cost of the biggest firm.
B)the minimum marginal cost of a representative firm.
C)the minimum average cost of a representative firm.
D)the minimum marginal cost of the smallest firm.
12
When new entrants in a perfectly competitive industry cause the price of labour to increase, the long-run supply curve will:
A)be upward-sloping.
B)be downward-sloping.
C)be horizontal.
D)be vertical.
13
Globalization is likely to cause which of the following in Canada?
A)An increase in the minimum efficient scale in many industries.
B)The elimination of many traditional labour-intensive industries.
C)A reduction in the price of intermediate goods.
D)All of the above.
14
A perfectly competitive industry in long-run equilibrium is characterized by:
A)supernormal profits and inefficient allocation of resources.
B)zero profits and efficient allocation of resources.
C)normal profits and efficient allocation of resources.
D)normal profits and inefficient allocation of resources.
15
In perfect competition, resources are used efficiently. This means that:
A)marginal benefits equal marginal revenue.
B)marginal cost equals marginal benefits.
C)there is no excess supply or demand.
D)firms can generate supernormal profits.





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