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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 a competitive market individual firms take as given
2. When a perfectly competitive firm makes a decision to shut down, it is most likely that
3. The short-run supply curve of a competitive firm is its
4. Some restaurants are open for breakfast, lunch, and dinner. In which of the following cases would it necessarily make sense for a restaurant to shut down for a meal?
5. In a perfectly competitive market, the process of entry or exit ends when
6. In economics, market power refers to the
7. A firm’s shut down decision
8. This graph of a typical firm in a competitive industry indicates that firms will
9. In the short run a firm should
10. When a profit-maximizing firm’s fixed costs are considered sunk in the short run it
11. In the long run, a profit-maximizing firm will choose to exit a market when
12. When a competitive market experiences an increase in demand that induces an increase in producer costs, which of the following is most likely to arise?
13. If marginal cost is less than marginal revenue
14. In a competitive market the individual supply curve of a competitive firm is based on its
15. 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
16. 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:
17. Competitive firms maximize profits by producing the quantity where
18. In the short run a firm in a competitive market should
19. In long-run equilibrium, a perfectly competitive firm produces the level of output at which
20. If the price of a competitive firm’s output increased, marginal revenue
21. Which of the following is a characteristic of a perfectly competitive market?
22. A competitive profit-maximizing firm makes zero economic profits. Which of the following is true?
23. The short-run supply curve of an individual competitive firm is its marginal cost curve above the
24. A profit-maximizing firm making losses (negative profit), but still producing output faces which of the following conditions?
25. If a competitive firm finds that at the current price and level of output, its marginal revenue is less than its marginal cost, it should

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