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

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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? 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 4. In a perfectly competitive market, the market demand is ________ and the demand faced by the individual firm is ________.
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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.
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