Economics 130: Exam 3 Study Guide

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Economics 130: Exam 3 Study Guide
1) Which market model has the least number of firms?
a. Pure monopoly
2) There is no control over price by firms in:
a. Pure competition
3) Which is true under conditions of pure competition?
a. A large number of firms
b. Standardized product (meaning no product differentiation)
c. Price takers (no exertion over product price)
d. Free entry and exit in and out of the market
e. Individual firms have a perfectly elastic demand curve, but whole industries that represent a market do not have a perfectly elastic curve (market demand)
f. Ask Kaibara
4) Competitive firms are assumed to:
a. See Problem 3
b. Ask Kaibara
5) The demand curve faced by a purely competitive firm:
a. Is completely
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This is also where AVC (average variable cost) is at its minimum.
18) Refer to the above graph. The level of output at which this firm is maximizing an economic profit is:
a. Point C, where (P = MR) = MC
Use the following to answer question 19: The table shows cost data for a firm that is selling in a purely competitive market.
Output
Average Variable Cost
Average Total Cost
Marginal Cost
10
5.00
15.00
3
12
4.00
13.00
4
14
4.75
11.50
6
16
5.75
9.00
9
20
9.00
12.00
14
19) Refer to the above cost chart. If the marginal revenue is $6, what output level will the firm produce?
a. 14 units of output
20) The individual firm’s short-run supply curve is that part of its:
a. Marginal cost curve that either equals or is above the average variable cost curve.
i. (If you look at the graph for Problems 16, 17, and 18, it’s at point A.) ii. (Anything below that point would mean no output or quantity.)

Use the following to answer question 21:
21) Refer to the graph on the left. To maximize profits, this firm would produce:
a. Profit Maximizing Rule: MR = MC
b. Point H

Use the following to answer question 22:
22) Based on the graph on the left, the firm is earning:
a. Zero economic profits.
b. Ask Kaibara

Use the following to answer questions 23 and 24:
23) Refer to the graph on the left. It represents a profit-maximizing firm producing under conditions of pure competition. When the firm is in

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