Name: ________________________ Class: ___________________ Date: __________ ID: A
9
Midterm 3 Practice Questions
Multiple Choice
Identify the choice
... [Show More] that best completes the statement or answers the question.
____ 1. Which of the following is not true of a perfectly competitive market?
a. Firms experience constant returns to scale.
b. Firms face significant barriers to entry.
c. Economic profit is zero.
d. Each firm chooses the quantity it wants to sell.
e. Each firm knows the prices of outputs and inputs.
____ 2. Which of the following is likely to be present in a perfectly competitive market?
a. patents
b. government licenses
c. nonprice competition such as advertising
d. high capital costs
e. firms producing identical products
Exhibit 8-1
Demand Cost
Price Q Q
Marginal
cost
$60 5 1 $50
80 4 2 60
100 3 3 100
120 2 4 140
____ 3. The perfectly competitive firewood market is composed of 1,000 identical consumers and 1,000 identical
firms. Exhibit 8-1 shows cost data for one firm and demand data for one consumer. What is the equilibrium
price?
a. $60
b. $80
c. $100
d. $120
e. It is impossible to determine the equilibrium price because there is no information on
market demand or supply.
____ 4. Which of the following is not true with regard to economic profit?
a. economic profit equals total revenue minus total cost
b. economic profit excludes implicit cost
c. economic profit is any profit greater than a normal profit
d. firms attempt to maximize economic profit
e. long-run economic profit is always zero in perfect competition
Name: ________________________ ID: A
2
Exhibit 8-2
Total cost and total revenue for a firm in a
perfectly competitive wool blanket market
Cost Demand
Q TC Q TR
0 $30 0 $0
1 33 1 10
2 37 2 20
3 42 3 30
4 51 4 40
5 60 5 50
6 90 6 60
____ 5. How much profit is the firm in Exhibit 8-2 earning (or how much of a loss is it suffering)?
a. -$17
b. $10
c. zero profit or loss
d. -$10
e. $30 [Show Less]