Micro___Studyquestions

Micro_Studyquestio - Microeconomics David Simon Name STUDY QUESTIONS FOR EXAM#3 1 Which of the following is not an assumption of the theory of

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Microeconomics Name: ______________________ David Simon STUDY QUESTIONS FOR EXAM #3 1) Which of the following is not an assumption of the theory of perfect competition? a. There are many sellers and many buyers, none of which is large in relation to total sales or purchases. b. Each firm produces and sells a differentiated product. c. Buyers and sellers have all relevant information with respect to prices, product quality, sources of supply. d. There is easy entry and exit. 2) Is it correct to say that in perfectly competitive market structure firms have no influence over the price they charge for the product? a. It is not correct, because if one firm changes its price, then the other firms will also change their prices since they are competing. b. The question is misleading because individual firms do not control the price but the owners of the firms do get together and discuss what price they will charge. c. The question is misleading because all sellers have perfect information and if one of them changes its price it knows that the others will know this and so it will have no advantage over the others by changing its price. d. It is correct because there are too many firms in the industry for a single firm to affect the price by any appreciable amount. 3) A firm that is a price taker is a firm: a. that does not have the ability to control the price of the product it sells. b. that does have the ability, albeit limited, to control the price of the product it sells. c. that can raise the price of the product it sells and still some units of its product. d. that sells a differentiated product. e. none of the above. 4) Perfectly competitive firms are price takers for all of the following reasons except: a. each firm is quite small relative to the total market supply. b. buyers and sellers have all the necessary information about prices, etc. c. the product is homogeneous. d. barriers to exit force firms to sell at the market price since there isn't any other option. 5) The demand curve for a perfectly competitive firm is: a. downward sloping. b. upward sloping. c. perfectly horizontal. d. perfectly vertical. e. may be downward or upward sloping depending upon what type of product is being offered for sale. 6) The market demand curve in a perfectly competitive market is: a. downward sloping. b. upward sloping. c. perfectly horizontal. d. perfectly vertical. e. may be downward or upward sloping depending upon what type of product is being offered for sale. 7) The perfectly competitive firm will produce at that output level at which: a. average variable cost is at a minimum. b. average total cost is at a minimum c. average fixed cost is at a minimum. d. marginal cost equals marginal revenue. 8 An industry comprised of 40 firms, none of which has more than 3 percent of the total market for a differentiated product is
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This note was uploaded on 01/28/2011 for the course ECON 1 taught by Professor Sm during the Spring '10 term at Laney College.

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Micro_Studyquestio - Microeconomics David Simon Name STUDY QUESTIONS FOR EXAM#3 1 Which of the following is not an assumption of the theory of

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