Which of the following goes closest to fitting the economist's model of perfect competition?Question 1Select one:a.The only hotel in a small country town.b.A Suburban law firm.c.A city-based firm of management consultants.d.A house cleaning business.Clear my choiceQuestion 2Not yet answeredMarked out of 1.00Flag questionTipsQuestion textIf a perfectly competitive firm sells 40 units of output at a market price of $380 per unit, its marginal revenue per unit is: ....Question 2Select one:a.$380b.$95c.$9.50d.more than $95, but less than $380Clear my choiceQuestion 3Not yet answeredMarked out of 1.00Flag questionTipsQuestion textWhich of the following are the same at all levels of output under perfect competition?Question 3Select one:a.Marginal cost and marginal revenue.b.Price and marginal cost.c.Price and marginal revenue.d.None of the answers provided are correct.Clear my choiceQuestion 4Not yet answeredMarked out of 1.00Flag questionTipsQuestion textA perfectly competitive firm's supply curve follows the upward-sloping segment of its marginal cost curve above the .................Question 4Select one:a.average variable cost curve.b.average price curve.c.average fixed cost curve. d.average total cost curve.Clear my choiceQuestion 5Not yet answeredMarked out of 1.00Flag questionTipsQuestion textWASHDOG is a perfectly competitive firm that washes dogs in Perth. It sells its service for $75 per dog. Its minimum average variable cost is $76 per unit. The firm should: .....Question 5Select one:a.shut down.b.maintain its current rate of output.c.increase output.d.decrease output, but not shut down.
Question
Which of the following goes closest to fitting the economist's model of perfect competition?Question 1Select one:a.The only hotel in a small country town.b.A Suburban law firm.c.A city-based firm of management consultants.d.A house cleaning business.Clear my choiceQuestion 2Not yet answeredMarked out of 1.00Flag questionTipsQuestion textIf a perfectly competitive firm sells 40 units of output at a market price of 380b.9.50d.more than 380Clear my choiceQuestion 3Not yet answeredMarked out of 1.00Flag questionTipsQuestion textWhich of the following are the same at all levels of output under perfect competition?Question 3Select one:a.Marginal cost and marginal revenue.b.Price and marginal cost.c.Price and marginal revenue.d.None of the answers provided are correct.Clear my choiceQuestion 4Not yet answeredMarked out of 1.00Flag questionTipsQuestion textA perfectly competitive firm's supply curve follows the upward-sloping segment of its marginal cost curve above the .................Question 4Select one:a.average variable cost curve.b.average price curve.c.average fixed cost curve. d.average total cost curve.Clear my choiceQuestion 5Not yet answeredMarked out of 1.00Flag questionTipsQuestion textWASHDOG is a perfectly competitive firm that washes dogs in Perth. It sells its service for 76 per unit. The firm should: .....Question 5Select one:a.shut down.b.maintain its current rate of output.c.increase output.d.decrease output, but not shut down.
Solution
Question 1: The closest to fitting the economist's model of perfect competition would be a house cleaning business. This is because there are many providers of this service and it is easy for new businesses to enter the market.
Question 2: If a perfectly competitive firm sells 40 units of output at a market price of 380. This is because in perfect competition, the price is equal to the marginal revenue.
Question 3: Under perfect competition, price and marginal revenue are the same at all levels of output. This is because the firm is a price taker and sells its product at the market price.
Question 4: A perfectly competitive firm's supply curve follows the upward-sloping segment of its marginal cost curve above the average variable cost curve. This is because the firm will only produce if the price is above the average variable cost.
Question 5: WASHDOG should shut down. This is because its average variable cost (75 per dog). Therefore, it is making a loss on each unit of output.
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