One of the defining characteristics of a perfectly competitive market is ( )
A. a small number of sellers.
B. a large number of buyers and a small number of sellers.
C. a standardized product.
D. significant advertising by firms to promote their products.
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If all firms have the same costs of production, then in long-run equilibrium, ( )
A. price exceeds all firms’ average cost.
B. price exceeds all firms’ marginal cost.
C. some firms have positive profits.
D. all firms have zero profits and just cover their opportunity costs.
If the market elasticity of demand for potatoes is 0.3, then the individual farmer’s elasticity of demand ( )
A. is also 0.3.
B. depends on how large a crop she produces.
C. will range between 0.3 and 1.0.
D. will be infinite.
Tommy’s Tires operates in a perfectly competitive market. If tires sell for $50 each and ATC = $40 per tire at the profit maximizing output level, then in the long run ( )
A. more firms will enter the market.
B. some firms will exit from the market.
C. the equilibrium price per tire will rise.
D. average total costs will fall.
Suppose demand for electricity is perfectly inelastic. A tax on electricity will be ( )
A. split between producers and consumers in equal shares.
B. paid only by producers.
C. paid only by consumers.
D. split between producers and consumers in unequal shares.
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