Price And Quantity Determination Under Perfect Competition - SS2 Economics Past Questions and Answers - page 1
In perfect competition, who determines the market price of a good or service?
Producers
Consumers
Both producers and consumers
No one, it is determined by market forces
What is the point at which the supply and demand curves intersect called?
Equilibrium price and quantity
Market price and quantity
Surplus and shortage
Elasticity of demand
In perfect competition, what type of power do producers have in setting the price of a good or service?
Market power
Monopoly power
Price setting power
No power
What happens to the price of a good or service when there is a surplus in the market?
It increases
It decreases
It stays the same
It is impossible to predict
(The price of a good or service decreases when there is a surplus in the market)
At what point do producers in perfect competition produce and sell the quantity that maximizes their profits?
Where their marginal cost equals the market price
Where their marginal revenue equals the market price
Where their average cost equals the market price
Where their total revenue equals the market price
(Producers in perfect competition produce and sell the quantity that maximizes their profits at the point where their marginal cost equals the market price)
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.
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.
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.