Midterm Exam 3 (1)

Midterm Exam 3 (1) - Midterm Exam 3 Econ 251 3 June 2011 40...

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Unformatted text preview: Midterm Exam 3 Econ 251 3 June 2011 40 Questions Please read the questions carefully and select the best answer to each question. 1. A competitive market satisfies allocative efficiency because a. the market produces where marginal cost equals average total cost. b. the market produces where marginal benefit equals marginal cost. c. the market produces where marginal cost equals average variable cost. d. the market produces where marginal benefit equals marginal revenue. 2. Which of the following is NOT true of a perfectly competitive market? a. Each firm produces a good that is identical to goods produced by other firms. b. There are many firms in the market c. No one firm has the ability to control price d. There are significant barriers to entry 3. If the following five firms are the only participants in a market, what is the Herfindahl- Hirschman Index? (Hint: convert sales to percentage market share first) Firm Sales 1 $78 Million 2 $24 Million 3 $13 Million 4 $56 Million 5 $4 Million Total Market $175 Million a. 3,259.1 b. 175 c. 171 d. 3253.9 4. In a perfectly competitive market, the market demand is ________ and the demand faced by the individual firm is ________. a. a downward sloping curve; perfectly elastic b. a downward sloping curve; a downward sloping curve c. perfectly elastic; perfectly elastic d. perfectly elastic; a downward sloping curve Use the following graph of a perfectively competitive market for the next 4 questions. 5. Based on the graph above for a perfectly competitive firm, what is the market equilibrium price? a. $5 b. $7 c. $10 d. $14 6. If the firm maximizes profit it will sell a quantity of ________ units. a. 40 b. 45 c. 50 d. 52 7. What level of profit will the firm earn in the short run? a.-208 b. 200 c. 315 d.-315 8. According to this same market, the firm will exit the market in the short run if the price is below _______. a. 5 b. 7 c. 10 d. 14 9. In a perfectly competitive market, total profit is maximized in which of the following cases? a. MR > MC b. MR < MC c. MR = MC d. MR < ATC The following table describes a perfectly competitive firm; please use it to answer the next two questions....
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Midterm Exam 3 (1) - Midterm Exam 3 Econ 251 3 June 2011 40...

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