||Multiple Choice Questions 1. Which of the following is false about perfect competition? a. Perfectly competitive firms sell homogeneous products. b. A perfectly competitive industry allows easy entry and exit. c. A perfectly competitive firm must take the market price as given. d. A perfectly competitive firm produces a substantial fraction of the industry output. e. All of the above are true. 2. An individual perfectly competitive firm a. May increase its price without losing sales. b. Is a price maker. c. Has no perceptible influence on the market price. d. Sells a product that is differentiated from those of its competitors. 3. When will a perfectly competitive firm’s demand curve shift? a. Never b. When the market demand curve shifts c. When new producers enter the industry in large numbers d. When either b or c occurs 4. In a market with perfectly competitive firms, the market demand curve is ____________ and the demand curve facing each individual firm is ____________. a. Upward sloping; horizontal b. Downward sloping; horizontal c. Horizontal; downward sloping d. Horizontal; upward sloping e. Horizontal; horizontal 5. The marginal revenue of a perfectly competitive firm a. Decreases as output increases. b. Increases as output increases. c. Is constant as output increases and is equal to price. d. Increases as output increases and is equal to price. 6. A perfectly competitive firm seeking to maximize its profits would want to maximize the difference between a. Its marginal revenue and its marginal cost. b. Its average revenue and its average cost. c. Its total revenue and its total cost. d. Its price and its marginal cost. e. Either a or d. 7. If a perfectly competitive firm’s marginal revenue exceeded its marginal cost, a. It would cut its price in order to sell more output and increase its profits. b. It would expand its output but not cut its price in order to increase its profits. c. It is currently earning economic profits. d. Both a and c are true. e. Both b and c are true. 8. A perfectly competitive firm maximizes its profit at an output in which a. Total revenue exceeds total cost by the greatest dollar amount. b. Marginal cost equals the price. c. Marginal cost equals marginal revenue. d. All of the above are true.