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Price And Quantity Determination Under Perfect Competition - SS2 Economics Past Questions and Answers - page 1

1

In perfect competition, who determines the market price of a good or service?

A

Producers

B

Consumers

C

Both producers and consumers

D

No one, it is determined by market forces

correct option: d
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2

What is the point at which the supply and demand curves intersect called?

A

Equilibrium price and quantity

B

Market price and quantity

 

C

Surplus and shortage

D

Elasticity of demand

correct option: a
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3

In perfect competition, what type of power do producers have in setting the price of a good or service?

A

Market power

B

Monopoly power

C

Price setting power

D

No power

correct option: d
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4

What happens to the price of a good or service when there is a surplus in the market?

A

It increases

B

It decreases

C

It stays the same 

D

It is impossible to predict

correct option: b

(The price of a good or service decreases when there is a surplus in the market)

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5

At what point do producers in perfect competition produce and sell the quantity that maximizes their profits?

A

Where their marginal cost equals the market price

B

Where their marginal revenue equals the market price

C

Where their average cost equals the market price

D

Where their total revenue equals the market price

correct option: a

(Producers in perfect competition produce and sell the quantity that maximizes their profits at the point where their marginal cost equals the market price)

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6

Define perfect competition.

 

Perfect competition is a market structure characterized by a large number of buyers and sellers, homogeneous products, perfect information, easy entry and exit of firms, and no market power for any individual buyer or seller.

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7

Who determines the market price and quantity of a good or service?

The market price and quantity of a good or service are determined by the forces of supply and demand.

 

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8

The market for pizza in perfect competition is characterized by a demand curve given by Qd = 150 - 3P and a supply curve given by Qs = 30P + 10. What is the equilibrium price and quantity of pizza in this market?

Equilibrium occurs when Qd = Qs. Setting the demand equal to the supply and solving for P:

150 - 3P = 30P + 10

140 = 33P

P = 4.24

Substituting P into either the demand or supply equation gives:

Q = Qd = 150 - 3(4.24) = 137.28

Therefore, the equilibrium price and quantity of pizza in this market are $4.24 and 137.28 units, respectively.

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