The Theory of Perfect Competition Is Built on Several Assumptions,including

question 141

Multiple Choice

The theory of perfect competition is built on several assumptions,including that

• A)the individual firm can affect the price of the product it sells.
• B)the individual firm can influence demand by advertising.
• C)each firm must earn economic profits to remain in the industry.
• D)any firm can easily enter or leave the industry.
• E)there are few producers of an identical product.

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Definitions:

Unit Product Cost

The total cost (both direct and indirect) associated with producing a single unit of product.

Break-even

The point at which total costs and total revenue are equal, meaning no net loss or gain is incurred by the business.

Sales Dollars

Represents the total revenue generated from the sale of goods or services before any expenses are subtracted.

Common Fixed Expenses

Expenses that remain constant in total regardless of changes in the level of activity or volume of output within a certain range.