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(20) 6) Which of the following statements correctly describes the market structure known as perfect competition? There are many buyers and sellers, none of which is large in relation to total sales or purchases. Each firm produces and sells a homogeneous product. There are no barriers to entry or exit. All of the above None of the above and productive (2 pts) 7) In perfect competition, resource allocative efficiency holds in efficiency holds in both the short-run and the long-run... only the long run both the short-run and the long-run... both the short-run and the long-run only the long run... only the long run only the long run... both the short-run and the long-run (2pts) 8) Which of the assumptions about perfect competition explains why economic profits must be zero in the long run? Perfect information No barriers to entry or exit Many buyers and sellers Homogeneous products (2 pts 9) Whether a firm is a constant, increasing or decreasing-cost industry is determined by whether there are economies, diseconomies, or constant returns to scale. what happens to factor prices as firms enter or leave the industry. how soon the law of diminishing returns sets in All of the above None of the above

Answer 1

6) D. All of the above. In case of perfect competition, there are large number of buyer and sellers selling homogenous goods. All firms earn normal profit in long run because of free entry and exit

7)A. Resources allocative takes place in both short run and long run whereas productive efficiency takes place only in long run.

8)B. Free entry and exit is the reason why all firms in long run earn zero economic profit

9)ans is B. When factor prices increases then it is increasing cost industry, when factor price is constant then constant cost industry and when factor price decreases then decreasing cost industry