1. Each of the following is implied if we say that transactions costs are absent EXCEPT:
A. sellers can easily communicate their prices.
2. Products are homogenous when:
D. they meet basic safety standards.
3. Characteristics of a perfectly competitive market include:
A. the absence of transaction costs
4. Characteristics of a perfectly competitive market include:
D. All of these are characteristics of a perfectly competitive market.
5. Characteristics of a perfectly competitive market include:
A. the presence of transaction costs.
6. Characteristics of a perfectly competitive market include:
D. All of these are characteristics of a perfectly competitive market.
7. In a perfectly competitive market, all of the following are true EXCEPT:
A. firms take prices as given.
8. In a perfectly competitive market:
D. buyers are price setters.
9. Graphically, market demand for a product:
D. is the vertical sum of the individual demand curves.
10. The market demand curve for a product:
D. will lie below all of the individual demand curves for a product.
11. Suppose Julia and Zach are the only consumers of milk. Julia’s demand for milk is defined
as
Q
dJulia
= 12 – 3
P
at prices below $4 and zero for prices above $4. Zach’s demand for milk is
defined as
Q
dZach
= 10 – 2
P
at prices below $5 and zero for prices above $5. If the market price for
milk is $4.50, market demand is:
A. zero units of milk.
12. Suppose Julia and Zach are the only consumers of milk. Julia’s demand for milk is defined
as
Q
dJulia
= 12 – 3
P
at prices below $4 and zero for prices above $4. Zach’s demand for milk is
defined as
Q
dZach
= 10 – 2
P
at prices below $5 and zero for prices above $5. Market demand when
price is $4 is:
A.
Q
dMarket
= 12 – 3
P
.
13. Suppose Julia and Zach are the only consumers of milk. Julia’s demand for milk is defined
as
Q
dJulia
= 12 – 3
P
at prices below $4 and zero for prices above $4. Zach’s demand for milk is
defined as
Q
dZach
= 10 – 2
P
at prices below $5 and zero for prices above $5. In this case, the
market demand curve for milk is:
A. upward sloping.
14. Suppose Julia and Zach are the only consumers of milk. Julia’s demand for milk is defined
as
Q
dJulia
= 12 – 3
P
at prices below $4 and zero for prices above $4. Zach’s demand for milk is
defined as
Q
dZach
= 10 – 2
P
at prices below $5 and zero for prices above $5. In this case, the
market demand curve for milk is:
A. is upward sloping.
15. Graphically, market supply for a product:
D. is the vertical sum of the individual supply curves.
16. The market supply curve for a product:
D. will lie above all of the individual supply curves for a product.
17. Milky Moo and Mega Cow are the only sellers of milk. Milky Moo’s supply function is
Q
sMMoo
= 12
P
– 6 at prices above $0.50 and zero at prices below $0.50. Mega Cow’s supply function
is
Q
sMCow
= 9
P
– 3 at prices above $0.33 and zero at prices below $0.33. At a price of $0.45:
D. neither Milky Moo nor Mega Cow supply milk.
18. Milky Moo and Mega Cow are the only sellers of milk. Milky Moo’s supply function is
Q
sMMoo
= 12
P
– 6 at prices above $0.50 and zero at prices below $0.50. Mega Cow’s supply function
is
Q
sMCow
= 9
P
– 3 at prices above $0.33 and zero at prices below $0.33. At a price of $0.45:
A. the market supply of milk is between 9 and 10 units.
19. Milky Moo and Mega Cow are the only sellers of milk. Milky Moo’s supply function is
Q
sMMoo
= 12
P
– 6 at prices above $0.50 and zero at prices below $0.50. Mega Cow’s supply function
is
Q
sMCow
= 9
P
– 3 at prices above $0.33 and zero at prices below $0.33. At a price of $2.00:
D. the market supply of milk is 42 units.
20. Milky Moo and Mega Cow are the only sellers of milk. Milky Moo’s supply function is
Q
sMMoo
= 12
P
– 6 at prices above $0.50 and zero at prices below $0.50. Mega Cow’s supply function
is
Q
sMCow
= 9
P
– 3 at prices above $0.33 and zero at prices below $0.33. At a price of $2.00, the
market supply of milk is:
A.
Q
sMarket
= 12
P
– 6.
21. Milky Moo and Mega Cow are the only sellers of milk. Milky Moo’s supply function is
Q
sMMoo
= 12
P
– 6 at prices above $0.50 and zero at prices below $0.50. Mega Cow’s supply function
is
Q
sMCow
= 9
P
– 3 at prices above $0.33 and zero at prices below $0.33. In this case, the market
supply curve for milk is:
D. an upward sloping straight line.
22. Milky Moo and Mega Cow are the only sellers of milk. Milky Moo’s supply function is
Q
sMMoo
= 12
P
– 6 at prices above $0.50 and zero at prices below $0.50. Mega Cow’s supply function
is
Q
sMCow
= 9
P
– 3 at prices above $0.33 and zero at prices below $0.33. In this case, the market
supply curve for milk is:
D. kinked at 3 units.
23. The short and long run market supply curves:
D. do not intersect.
24. With free entry:
D. the long run market demand curve is horizontal at the market price.
25. With free entry:
D. there is a known and limited number of potential suppliers that can produce a good in the long
run.
26. Suppose that, in the long run, a dairy’s variable costs are
VC
= 2
Q
2 (where
Q
is the
number of gallons of milk produced each day), its marginal cost is
MC
= 4
Q
and there is an
avoidable fixed cost of $50 per day. In the long run, there is free entry into the market. What is the
dairy’s total cost function?
A.
TC
= 2
Q
2 + 4
Q
27. Suppose that, in the long run, a dairy’s variable costs are
VC
= 2
Q
2 (where
Q
is the
number of gallons of milk produced each day), its marginal cost is
MC
= 4
Q
and there is an
avoidable fixed cost of $50 per day. In the long run there is free entry into the market. What is the
efficient scale of production?
D. 50 gallons per day
28. Suppose that, in the long run, a dairy’s variable costs are
VC
= 2
Q
2 (where
Q
is the
number of gallons of milk produced each day), its marginal cost is
MC
= 4
Q
and there is an
avoidable fixed cost of $50 per day. In the long run there is free entry into the market. The long
run market supply curve is:
D. horizontal at $100 per gallon.
29. Properties of long-run competitive equilibrium with free entry include:
A. an equilibrium price equal to the minimum
AC
.
30. Properties of long-run competitive equilibrium with free entry include:
A. an equilibrium price equal to the minimum
MC
.
31. Properties of long-run competitive equilibrium with free entry include:
D. All of these are properties of long-run competitive equilibrium.
32. Suppose the market demand for milk is
Q
d
= 150 – 5
P
. Additionally, suppose that a dairy’s
variable costs are
VC
= 2
Q
2 (where
Q
is the number of gallons of milk produced each day), its
marginal cost is
MC
= 4
Q
and there is an avoidable fixed cost of $50 per day. In the long run there
is free entry into the market. What is the market equilibrium price?
D. $25 per gallon