Consumer Theory And Market

Question 1

A market is competitive if
(i) firms have the flexibility to price their own product.
(ii) each buyer is small compared to the market.
(iii) each seller is small compared to the market.
A) (i) and (ii) only
B) (i) and (iii) only
C) (ii) and (iii) only
D) All of the above are correct.

Answer 1

C) (ii) and (iii) only

Question 2

When a firm has little ability to influence market prices it is said to be in what
kind of a market?
A) a competitive market
B) a strategic market
C) a thin market
D) a power market

Answer 2

A) a competitive market

Question 3

In a competitive market, the actions of any single buyer or seller will
A) have a negligible impact on the market price.
B) have little effect on overall production but will ultimately change final
product price.
C) cause a noticeable change in overall production and a change in final
product price.
D) adversely affect the profitability of more than one firm in the market.

Answer 3

A) have a negligible impact on the market price.

Question 4

Assuming that Jerry’s Bicycle Shop operates in a competitive market for
bicycles, which of the following statements is(are) true?
(i) He chooses the price at which he sells his bicycles.
(ii) He chooses the quantity of bicycles that he supplies.
(iii) His market is characterized by one or more barriers to entry.
A) (i) only
B) (ii) only
C) (i) and (ii) only
D) (ii) and (iii) only

Answer 4

B) (ii) only