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AP Microeconomics Perfect Competition — practice questions

Explore 7 free Perfect Competition questions in AP Microeconomics Economics. Open each question or exercise to read its content, reference answers and available explanation.

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Perfect Competition questions and exercises with answers

Showing questions 1–7 of 7.

The short run for a perfectly competitive firm. What defines this period?Read the answer and worked solution →How is marginal revenue defined in the source?Read the answer and worked solution →For a perfectly competitive firm, marginal revenue equals what?Read the answer and worked solution →The source defines 'entry' as which process?Read the answer and worked solution →The source defines 'exit' as which process?Read the answer and worked solution →How does the source define allocative efficiency in a perfectly competitive market?Read the answer and worked solution →Catch the false claim about price takersRead the answer and worked solution →

Worked practice questions

The short run for a perfectly competitive firm. What defines this period?

  1. The firm has one fixed input and incurs fixed costs
  2. The firm has already left the market entirely
  3. All of the firm's inputs can be freely adjusted
  4. The firm has no costs of production at all
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Correct answer: A. The firm has one fixed input and incurs fixed costs

1. The source defines the short run for this example as a situation with one fixed input. 2. Because that input is fixed, the firm incurs fixed costs of production regardless of output. 3. Freely adjusting all inputs instead describes the long run, not the short run. 4. A firm with no costs at all is not the definition given for either time frame. _Source: OpenStax Principles of Microeconomics for AP Courses (CC BY 4.0), Ch 8 "Perfect Competition", section 8.1 | Perfect Competition and Why It Matters_

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How is marginal revenue defined in the source?

  1. The additional revenue gained from selling one more unit
  2. The total revenue earned from all units sold
  3. The average revenue per unit across all output levels
  4. The additional cost of producing one more unit
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Correct answer: A. The additional revenue gained from selling one more unit

1. Marginal revenue is defined against a single additional unit of output, not the total or the average. 2. It is the additional revenue a firm gains from selling that one more unit. 3. Total revenue across all units sold is a different, broader concept than marginal revenue. 4. The additional cost of producing one more unit is marginal cost, a separate concept from marginal revenue. _Source: OpenStax Principles of Microeconomics for AP Courses (CC BY 4.0), Ch 8 "Perfect Competition", section 8.2 | How Perfectly Competitive Firms Make Output Decisions_

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For a perfectly competitive firm, marginal revenue equals what?

  1. Its average total cost
  2. Its own marginal cost
  3. Total revenue over total cost
  4. The market price it faces
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Correct answer: D. The market price it faces

1. Because a price-taking firm sells every unit at the same market price, each additional unit sold adds exactly that price to revenue. 2. That means marginal revenue equals price for a perfectly competitive firm. 3. Average total cost is a cost concept, not a revenue concept, so it does not equal marginal revenue. 4. Marginal revenue equals marginal cost only at the specific profit-maximizing quantity, not at every quantity, so 'always' is too strong a claim. _Source: OpenStax Principles of Microeconomics for AP Courses (CC BY 4.0), Ch 8 "Perfect Competition", section 8.2 | How Perfectly Competitive Firms Make Output Decisions_

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More Economics topics

Consumer ChoicesNegative ExternalitiesLabor Markets and IncomeMonopolistic Competition and OligopolyPositive Externalities and Public GoodsProduction, Costs and Industry StructureMonopolyChoice in a World of Scarcity