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Unformatted text preview: 1 ECON 2010 Fall 2010 Review questions chapter 9 1. In which two market models would advertising be used most often? A. Pure competition and monopolistic competition B. Pure competition and pure monopoly C. Monopolistic competition and oligopoly D. Pure monopoly and oligopoly 2. Under which market model are the conditions of entry into the market easiest? A. Pure competition B. Pure monopoly C. Monopolistic competition D. Oligopoly 3. Which is not a basic market model? A. Pure competition B. Free enterprise C. Oligopoly D. Monopoly 4. Which characteristic would best be associated with pure competition? A. Few sellers B. Price taker C. Nonprice competition D. Product differentiation 5. Which idea is inconsistent with pure competition? A. Short-run losses B. Product differentiation C. Freedom of entry or exit for firms D. A large number of buyers and sellers 6. eBay.com is a vast auction site that is similar to a competitive market in some ways but also differs from it in others. Which of the following describes how eBay resembles a competitive market? A. It is easy to enter and easy to leave eBay. B. Sellers sometimes do not describe the products accurately on eBay. C. There is a great variety of different products sold on eBay. D. On eBay the large sellers dominate the market. 2 7. If the marginal revenue of the next widget the firm produces is $50 and its marginal cost is $35, a firm should: A. reconsider past production decisions. B. decrease production. C. increase production. D. hold production constant. 8. A perfectly competitive firm facing a price of $10 decides to produce 100 widgets. If its marginal cost of producing the last widget is $12 and it is seeking to maximize profit, the firm should: A. produce more widgets. B. produce fewer widgets. C. continue producing 100 widgets. D. shut down. 9. A firm should increase the quantity of output as long as its: A. Marginal revenue is greater than its marginal cost B. Marginal cost is greater than its marginal revenue C. Average revenue is greater than its average total cost D. Average revenue is greater than its average variable cost 10. A firm sells a product in a purely competitive market. The marginal cost of the product at the current output of 800 units is $3.50. The minimum possible average variable cost is $3.00. The market price of the product is $4.00. To maximize profit or minimize losses, the firm should: A. Continue producing 800 units B. Produce less than 800 units C. Produce more than 800 units D. Shut down 11. Suppose a perfectly competitive firm can increase its profits by reducing its output. Then it must be the case that the firm's: A. marginal revenue equals its marginal cost. B. price exceeds its marginal cost....
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