Tutorial 5 Introduction to Business Economics

Answer all the questions

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

decided by market)
A) many buyers and sellers
B) homogeneous product
C) free entry and exit -pure competition
D) Both 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/are 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 (homogenous product)
B) the buyers
C) neither the buyers nor the sellers
D) the sellers
Tutorial 5 Introduction to Business Economics

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.

11) A market in which firms sell a homogeneous product and cannot influence market price
is most likely:
A) a perfectly competitive market.
B) an oligopoly.
C) a monopolistically competitive market.
D) a monopoly market.

12) In a market for a homogeneous good, if sellers and buyers can enter or exit a market
freely, the market is most likely:
A) an oligopoly.
B) a monopolistically competitive market.
C) a monopoly.
D) a perfectly competitive market.

13) Which of the following statements about a perfectly competitive market is incorrect?
A) There are many sellers, each supplying a small quantity.
B) There are many buyers, each purchasing a small quantity.
C) The market sell homogeneous products.
D) Buyers and sellers cannot enter exit the market freely.

14) Which of the following is the best example of a perfectly competitive firm?
A) DeBeers Diamond Company
B) your local cable television company
C) Tino's Italian Eatery, a local restaurant
D) Jones's wheat farm in eastern Washington

15) A firm that can sell as much as it can produce at the market price is likely operating in:
A) a perfectly competitive market.
B) a monopoly.
C) a monopolistically competitive market.
Tutorial 5 Introduction to Business Economics

D) an oligopoly.
Tutorial 5 Introduction to Business Economics

16) A perfectly competitive firm can:

A) affect the market price for its good.
B) sell as much as it can produce at the market price.
C) prevent entry of other firms into their market.
D) collude with its competitors to set prices.

17) A market where individual firms cannot affect the market price of their good is most
likely:
A) a monopoly
B) an oligopoly
C) a monopolistically competitive market.
D) perfectly competitive

18) How does the firm-specific demand curve in a perfectly competitive market compare to
that in a monopoly?
A) The firm-specific demand curve in a perfectly competitive market is horizontal. The
demand curve in a monopoly is downward sloping.
B) They are the same.
C) The firm-specific demand curve in a perfectly competitive market is horizontal. The
demand curve in a monopoly is upward sloping.
D) The firm-specific demand curve in a perfectly competitive market is vertical. The demand
curve in a monopoly is horizontal.

19) In which of the following market structures do you find many sellers?
A) monopolistic competition
B) perfect competition
C) monopoly
D) Both A and B are correct

20) In which of the following market structures do you find only one seller?
A) a monopoly
B) a oligopoly
C) a monopolistic competition
D) a perfectly competitive market