Midterm 3 Practice Questions With Verified answers < ECON 2005>ALL ANSWERS CORRECT(100% score)

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Midterm 3 Practice Questions Multiple Choice Identify the choice that best completes the statement or answers the question. ____ 1. Which of the following is not true of a perfectly competitive mar... ket? a. Firms experience constant returns to scale. b. Firms face significant barriers to entry. c. Economic profit is zero. d. Each firm chooses the quantity it wants to sell. e. Each firm knows the prices of outputs and inputs. ____ 2. Which of the following is likely to be present in a perfectly competitive market? a. patents b. government licenses c. nonprice competition such as advertising d. high capital costs e. firms producing identical products Exhibit 8-1 Demand Cost Price Q Q Marginal cost $60 5 1 $50 80 4 2 60 100 3 3 100 120 2 4 140 ____ 3. The perfectly competitive firewood market is composed of 1,000 identical consumers and 1,000 identical firms. Exhibit 8-1 shows cost data for one firm and demand data for one consumer. What is the equilibrium price? a. $60 b. $80 c. $100 d. $120 e. It is impossible to determine the equilibrium price because there is no information on market demand or supply. ____ 4. Which of the following is not true with regard to economic profit? a. economic profit equals total revenue minus total cost b. economic profit excludes implicit cost c. economic profit is any profit greater than a normal profit d. firms attempt to maximize economic profit e. long-run economic profit is always zero in perfect competitionName: ________________________ ID: A 2 Exhibit 8-2 Total cost and total revenue for a firm in a perfectly competitive wool blanket market Cost Demand Q TC Q TR 0 $30 0 $0 1 33 1 10 2 37 2 20 3 42 3 30 4 51 4 40 5 60 5 50 6 90 6 60 ____ 5. How much profit is the firm in Exhibit 8-2 earning (or how much of a loss is it suffering)? a. -$17 b. $10 c. zero profit or loss d. -$10 e. $30 Exhibit 8-8 ____ 6. If the price-taking firm in Exhibit 8-8 is currently producing 6 units, then to maximize profit in the short run, it should a. keep producing 6 units b. increase production to 12 units c. increase production to 14 units d. increase production to 8 units e. shut downName: ________________________ ID: A 3 Exhibit 8-9 ____ 7. In Exhibit 8-9, total revenue at the profit-maximizing output equals a. $2,400 b. $4,000 c. $5,200 d. $5,600 e. $6,000 Exhibit 8-11 ____ 8. At the profit-maximizing output level, the firm represented in Exhibit 8-11 experience [Show More]

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