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Economics 101 Practice Test: Competitive Markets
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Avg score: 66% • Most missed: “In a competitive market, the actions of any single buyer or seller will”
A competitive market is a theoretical economic structure where many buyers and sellers trade identical products. In a competitive market, no single buyer or seller has the power to influence the market.  Here are some characteristics of a competitive market: Many buyers and sellers, No barriers to entry, Homogeneous products, Price takers, and Free entry and exit.  Some examples of competitive markets include: Agricultural produce, Internet technology, and The foreign exchange market.  In a perfectly competitive market, there are no startup costs or legal restrictions. Businesses are also... Show more
Economics 101 Practice Test: Competitive Markets
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25 Questions

1. In the short run a firm should
2. At Paula’s Pizza, the marginal revenue of the last pizza produced is $12. The marginal cost of the last pizza produced is $10. In order to increase profits, Paula should:
3. In a competitive market the individual supply curve of a competitive firm is based on its
4. If a perfectly competitive firm currently produces where price is greater than marginal cost it
5. Other things the same, if a competitive firm doubles its output
6. In the paper industry, as more paper makers enter the market, the price of raw materials such as pulp will be bid up. If the paper industry operates in a perfectly competitive market, then an increase in demand causes the price of paper to rise in the
7. Competitive firms maximize profits by producing the quantity where
8. In economics, market power refers to the
9. The short-run supply curve of an individual competitive firm is its marginal cost curve above the
10. Crude oil is used to produce fiberglass boats. Supposing these boats are produced in a competitive market, an increase in the price of crude oil shifts
11. The long-run supply curve in a perfectly competitive market is more elastic than in the short run because
12. In the long run in a perfectly competitive industry, economic profits of all firms will equal zero in the long run
13. A firm’s shut down decision
14. The Not Quite Broke Ranch sells 1,000 units of beef in a competitive market and has total revenues of $200,000. From this information alone we know which of the following is $200?
15. The exit of existing firms from a competitive market will
16. A profit-maximizing firm making losses (negative profit), but still producing output faces which of the following conditions?
17. When firms in an industry have the same cost structure which is not changed by the entry or exit of firms,
18. When a profit-maximizing firm’s fixed costs are considered sunk in the short run it
19. If all incumbent firms and all potential firms have the same cost curves and the market is characterized by free entry and exit, the long-run market supply curve
20. If marginal cost is less than marginal revenue
21. If firms in a competitive market are earning economic profits greater than zero, then firms
22. Which of the following is a characteristic of a perfectly competitive market?
23. A competitive profit-maximizing firm makes zero economic profits. Which of the following is true?
24. In the long run, a profit-maximizing firm will choose to exit a market when
25. When firms have an incentive to exit a competitive market, their exit will

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