Econ 2010 Quiz #5 Test Papers and Correct Answers.

Econ 2010 Quiz #5 Test Papers and
Correct Answers.
Which of the following is NOT an assumption of perfectly competitive markets?



a) many buyers and many sellers

b) no restriction on entry

c) complete information about prices

d) new entrants have higher costs - Answer d) new entrants have higher costs



Perfect competition is a

market in which... - Answer Perfect competition is a

market in which

■ Many firms sell identical products to many buyers.

■ There are no restrictions on entry into the market.

■ Established firms have no advantage over new ones.

■ Sellers and buyers are well informed about prices.



In perfect competition, the market demand for the good ________ perfectly elastic and the
demand for the output of one firm ________ perfectly elastic.

a) is; is

b) is; is not

c) is not; is

d) is not; is not - Answer c) is not; is



Firms in perfectly competitive industries have a ________ individual demand curve when the
price is on the vertical axis and the quantity is on the horizontal axis. The shape of the curve is
result of the firm being a ________.

a) horizontal; price taker

b) downward sloping; price maker

c) vertical; price taker

d) downward sloping; price taker - Answer a) horizontal; price taker