Question

1. Which of the following is not a characteristic of perfect competition?

		Firms face downward-sloping demand functions.
		Outputs of the firms are perfect substitutes for one another.
		No barriers to entry or exit.
		Large number of firms in the industry.

2. Which of the following statements is correct?

		Managerial decisions are affected by both microeconomic and macroeconomic forces.
		Managerial decisions are affected primarily by microeconomic forces.
		Managerial decisions are affected primarily by macroeconomic forces.
		By and large, managerial decisions are not affected by either microeconomic or macroeconomic forces.

3. Which of the following would have the greatest positive impact on a country's domestic economy?

		A decrease in the incomes of consumers in foreign countries.
		An increase in spending by foreigners on the country's exports.
		A decrease in the confidence of foreign investors in the country's economy.
		An increase in spending on imports from other countries.

Answer 1

1. Firms face downward sloping demand functions is not a characteristic of perfect competition because firms face horizontal demand curve i.e perfectly elastic demand. Hence,option(A) is correct.

2. Managerial decisions are affected by both microeconomic and macroeconomic forces. Hence, option(A) is correct.

3. An increase in spending by foreigners on the country's exports would have the greatest positive impact on a country's domestic economy. Hence, option(B) is correct.