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costs supply and perfect competition MCQs

Practise focused costs supply and perfect competition questions with marked answers for exam preparation and subject revision.

costs supply and perfect competition Mcqs
1. In perfect competition ?
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A. Products are heavily differentiated

B. The products firm offer is very similar

C. Consumer have limited information

D. A few firms dominate the market

2. Which of the following market would most closely satisfy the requirements for a competitive market ?
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A. All of these answers represent competitive markets

B. milk

C. electricity

D. cola

E. cable television

3. For perfect competition to work there must be ?
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A. many buyers and sellers

B. perfect information

C. a standard product

D. free entry and exit

E. all of the above
4. In the long run in perfect competition ?
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A. The price equals total cost

B. Firms are productively efficient

C. Firms are allocatively inefficient

D. The price equals the total revenue

5. Which of the following is not a characteristic of a competitive market ?
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A. The goods offered for sale are largely the same.

B. All of these answers are characteristic of a competitive market

C. The are many buyers and sellers in the market

D. Firms can freely enter or exit the market

E. Firms generate small but positive economic profits in the long run
6. The firms long run output decision will be where ?
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A. marginal cost equals output

B. marginal revenue equals long run marginal cost

C. marginal revenue equals output

D. long run average cost is lowest

7. Decrease returns to scale means that _____ as ______?
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A. Short run marginal cost rises, output rises

B. long run marginal cost rises, output rises

C. long run average cost rises, output rises

D. Short run average cost rises, output rises

8. In monopolistic competition ?
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A. There are barriers to entry to prevent entry

B. Firms make normal profits in the long run

C. All products are homogeneous

D. Firms face a perfectly elastic demand curve

9. Firms in perfect competition face a?
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A. perfectly inelastic supply curve

B. perfectly elastic supply curve

C. perfectly elastic demand curve

D. perfectly inelastic demand curve

10. For a perfectly competitive firm ?
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A. price equals total cost

B. price equals total revenue

C. price is greater than marginal revenue

D. Price equals marginal revenue
11. In perfect competition ?
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A. A few firms dominate the industry

B. Firms are price makers

C. There are many buyers and sellers

D. There are many buyers but few sellers

12. A grocery store should close at night if the ?
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A. total costs of staying open are greater than the total revenue due to staying open

B. total costs of staying open are less than the total revenue due to staying open

C. variable costs of staying open are less than the total revenue due to staying open.

D. variable costs of staying open are greater than the total revenue due to staying open
13. If a competitive firm is producing a level of output where marginal revenue exceeds marginal cost the firm could increase profit if it ?
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A. maintained production at the current level

B. increased production

C. decreased production

D. temporarily shut down.

14. In a competitive industry each buyer and seller ?
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A. Producer different products

B. is a price taker

C. Believes that can influence price

D. Prevents the entry of competitors

15. A production is technique is technically efficient if ?
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A. there is no way to make a given output using less of one input and no more of the other inputs

B. inputs are minimized

C. output is maximized

D. Costs are minimized

16. Holding all factors constant except one and increasing a variable factor is expected to lead to steadily decreased marginal product of that factor, this is an example of ?
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A. decreasing returns to scale

B. The law of diminishing returns

C. an inefficient production technique

D. constant returns to scale

17. The long-run market supply curve ?
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A. is always perfectly elastic

B. is always more elastic than the short-run market supply curve.

C. is always less elastic than the short-run market supply curve

D. has the same elasticity as the short run market supply curve

18. If an input necessary for production is in limited supply so that an expansion of the industry raises costs for all existing firms in the market, then the long-run market supply curve for a good could be ?
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A. downward sloping

B. upward sloping

C. perfectly elastic

D. perfectly inelastic

19. Which of the following is not one of the four Ps in marketing ?
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A. Product

B. Price

C. Place

D. Presence

20. A competitive firm produces a level of output at which ?
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A. None of the above

B. price equals marginal cost

C. Price is greater than marginal cost

D. price is less than marginal cost

21. In the short run a firm will produce zero output if ?
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A. price is between short run average total cost and short run average variable cost

B. price is less than short run average variable cost

C. profit is zero

D. price is greater than short run average total cost

22. In the long run in perfect competition ?
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A. Total revenue = Total variable cost

B. price = average cost = marginal cost

C. price = average cost = total cost

D. price = marginal cost = total cost

23. When average cost is falling marginal cost is ________ and when average cost is rising marginal cost is?
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A. less than average cost, less than average cost

B. greater than average cost, greater than average cost

C. less than average cost, greater than average cost

D. greater than average cost, less than average cost

24. If a firm takes over a competitor then, according to porters 5 forces model ?
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A. Supplier power is higher

B. Buyer power is higher

C. Rivalry is lower

D. Substitute threat is higher

25. In the short run firms in perfect competition will still produce provided ?
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A. The price covers variable cost

B. The price covers average fixed cost

C. The price covers average variable cost

D. The price covers fixed costs

26. If a competitive firm doubles its output its total revenue ?
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A. more than double

B. cannot be determined because the price of the good may rise or fall

C. doubles.

D. less than doubles.

27. In marketing USP stands for ?
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A. Unique Selling Proposition

B. Under Sales Procedure

C. Unit Sales Point

D. Underlying Sales Proposition

28. A profit maximizing firm is perfect competition produces where ?
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A. Total revenue is maximized

B. Marginal revenue equals zero

C. Marginal revenue equals marginal cost

D. Marginal revenue equals average cost

29. In perfect competition ?
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A. Short run abnormal profits are competed away by the government

B. Short run abnormal profits are competed away by greater advertising

C. Short run abnormal profits are competed away by firms entering the industry

D. Short run abnormal profits are completed away by firms leaving the industry

30. In the long-run some firms will exit the market if the price of the good offered for sale is less than ?
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A. average total cost

B. marginal cost

C. average revenue

D. marginal revenue

31. in long-run equilibrium in a competitive market, firms are operating at ?
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A. zero economic profit

B. their efficient scale

C. intersection of marginal cost and marginal revenue

D. all of these answers are correct

E. the minimum of their average-total-cost curves

32. The competitive firm maximize profit when it produces output up to the point where ?
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A. price equals average variable cost

B. marginal cost equals total revenue

C. marginal cost equals marginal revenue

D. marginal revenue equals average revenue

33. For a competitive firm, marginal revenue is ?
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A. average revenue divided by the quantity sold

B. equal to the quantity of the good sold

C. equal to the price of the good sold

D. total revenue divided by the quantity sold

34. In the long run, the competitive firms supply curve is the ?
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A. portion of the marginal cost curve that lies above the average variable cost curve.

B. upward-sloping portion of the average total cost curve

C. upward-sloping portion of the average variable cost curve

D. entire marginal cost curve

E. portion of the marginal cost curve that lies above the average total cost curve
35. In perfect competition ?
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A. the price equals the average variable cost

B. The price equals the marginal revenue

C. the price equals the total cost

D. the fixed cost equals the variable costs

36. In the short run, the competitive firms supply curve is the portion of the marginal cost curve that lies above the average variable cost curve?
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A. upward-sloping portion of the average variable cost curve

B. Upward-sloping portion of the average total cost curve

C. portion of the marginal-cost curve that lies above the average variable cost curve

D. entire marginal cost curve.

E. portion of the marginal cost curve that lies above the average total cost curve.

37. A competitive firm demand curve is ?
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A. vertical

B. elastic

C. downward sloping

D. Horizontal
38. In monopolistic competition ?
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A. Marginal revenue = price

B. Demand is perfectly elastic

C. The marginal revenue is below the demand curve and diverges

D. Products are homogeneous

39. If a firm is not operating at the output necessary to achieve all scale economies, it has not achieved its ?
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A. Minimum efficient scale

B. Maximum efficient scale

C. Efficient scale

D. Average efficient scale

40. In monopolistic competition firms profit maximize where ?
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A. Marginal revenue = Average cost

B. Marginal revenue = Total cost

C. Marginal revenue = Marginal cost

D. Marginal revenue = Average revenue

41. In monopolistic competition of firms are making abnormal profit other firms will enter and ?
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A. The average cost will shift downwards

B. The average variable cost will increase

C. the demand curve will shift inwards

D. The marginal cost will shift outwards
42. In Porters five force model conditions are more favorable for firms within an industry if ?
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A. Buyer power is high

B. Entry threat is low

C. Substitute threat is high

D. Supplier power is high

43. If a long run average cost curve is falling form left to right this is an example of ?
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A. constant returns to scale

B. increasing returns to scale

C. decreasing returns to scale

D. the minimum efficient scale

44. The short run marginal cost curve cuts the short run total cost curve and short run average variable cost curve ?
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A. At their lowest points

B. When they are increasing

C. When they are declining

D. When marginal revenue is zero

45. If all firms in a market have identical cost structures and if inputs used in the production of the good in that market are readily available, then the long-run market supply curve for that good should be ?
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A. perfectly elastic

B. upward sloping

C. perfectly inelastic

D. downward sloping

46. For a competitive firm, its short run supply curve is ______ and its long run supply curve is _____?
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A. SMC below SAVC, LMC bellow LAC

B. SMC below SAVC, LMC above LAC

C. SMC, LMC

D. SMC above SAVC, LMC above LAC
47. Effective branding will tend to make ?
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A. Supply more price inelastic

B. Demand more income elastic

C. Demand more price inelastic

D. Supply more income elastic
48. If the long-run market supply curve for a good is perfectly elastic, an increase in the demand for that good will, in the long run, cause ?
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A. an increase the price of the good and an increase in the number of firms in the market

B. no impact on either the price of the good or the number of firms in the market

C. an increase in the number of firms in the market but no increase in the price of the good

D. an increase the price of the good but no increase in the number of firms in the market

49. In monopolistic competition ?
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A. There are few buyers

B. There is one seller

C. There are few sellers

D. There are many sellers

50. Short run average total costs are equals to the sum of ____ and _____?
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A. Short run variable costs, profit

B. Short run average variable costs, profit

C. Short run average variable costs, profit run average fixed costs

D. Short run opportunity costs, profit