E201F05FinalExam

E201F05FinalExam - Econ 201 Final Exam 1 In a competitive market no single producer can influence the market price because a many other sellers are

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Econ 201 Final Exam 1. In a competitive market, no single producer can influence the market price because a. many other sellers are offering a product that is essentially identical. b. consumers have more influence over the market price than producers do. c. government intervention prevents firms from influencing price. d. producers agree not to change the price. Figure 14-2 2. Refer to Figure 14-2. When price falls from P 3 to P 1 , the perfectly competitive firm finds that a. fixed cost is higher at a production level of Q 1 than it is at Q 3 . b. it should produce Q 1 units of output. c. it should produce Q 3 units of output. d. it is unwilling to produce any output. 3. The short-run supply curve for a firm in a perfectly competitive market is a. likely to be horizontal. b. likely to slope downward. c. determined by forces external to the firm. d. its marginal cost curve (above average variable cost). 4. A price-taking firm produces rubber balls. When the price of rubber balls is below the firm’s minimum average total cost, but above the firm’s minimum average variable cost, the firm a. will experience losses but it will continue to produce rubber balls in the short run. b. will shut down in the short run. c. will be earning both economic and accounting profits. d. should raise the price of its product. Figure 14-5: A typical firm in a competitive market.
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5. Refer to Figure 14-5. When market price is P 5 , the firm's maximum profit is the area a. P 5 Q 3 . b. (P 5 - P 3 ) Q 2 . c. (P 5 - P 4 ) Q 3 . d. When market price is P 5 there are no profits. 6. Refer to Figure 14-5. Firms would want to enter this market whenever price exceeds a. P 1 . b. P 2 . c. P 3 . d. None of the above are correct. 7. The irrelevance of sunk costs is best described by which of the following business decisions? a. New airlines enter the market and earn accounting profits. b. Airlines continue to sell tickets even though they are reporting large losses. c. Airlines exit the market when they report losses. d. All of the above are correct. 8. One of the most important determinants of the success of free-market capitalism is a. enlightened governments selecting firms that should not be allowed to exit a market. b. free entry and exit in markets. c. government regulation of market participants. d. having a few large firms rather than thousands of small ones. 9. A firm in a competitive market has the following cost structure: Output Total Cost 0 $5 1 $10 2 $12 3 $15 4 $24 5 $40 If the market price is $5, this firm will a. produce five units in the short run and exit in the long run. b. produce three units in the short run and exit in the long run. c. produce three units in the short run and remain in the market in the long run. d.
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This note was uploaded on 11/20/2010 for the course ECON 101 taught by Professor Glennbinnington during the Spring '09 term at Carleton CA.

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E201F05FinalExam - Econ 201 Final Exam 1 In a competitive market no single producer can influence the market price because a many other sellers are

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