In a Perfectly Competitive Industry

question 230

Multiple Choice

In a perfectly competitive industry

• A) each firm sets its own price so that it is different from the prices of its competitors.
• B) earning an economic profit is certain.
• C) each firm is a price taker.
• D) consumers band together to demand the lowest price possible.

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Definitions:

Perfect Substitutes

Two goods that could be used in place of each other with no loss of utility to the consumer.

Perfect Complements

Goods that are always used together in fixed proportions, where the consumption of one good requires the consumption of a specific quantity of another good.

Indifference Curves

Graphs representing combinations of goods among which a consumer is indifferent, showing trade-offs in consumption preferences.

Marginal Utility

The extra pleasure or advantage obtained from using an additional unit of a product or service.