03 Jun QUIZ 3 Please put your answers to multiple choice questions in
Question
QUIZ 3
Please put your answers to multiple choice questions in the proper cell of the Excel file under the
link Quiz 3 MC Answer Sheet and provide your answers to short-answer questions/problems in a
separate Word file. Not following these instructions will result in a 5 point penalty!
MULTIPLE CHOICE QUESTIONS (2 pts. EACH)
1. Characteristics of a perfectly competitive market include
A. The absence of transaction costs
B. Differentiated products
C. Few sellers, some with a large market share
D. All of the above
2. Suppose Julia and Zach are the only consumers of milk. Julia’s demand for milk is defined as
at prices below $4 and zero for prices above $4. Zach’s demand for milk is
defined as
at prices below $5 and zero for prices above $5. If the market price
for milk is $4.50, market demand is
A. Zero
B. 1.5
C. 1
D. 10
3. Milky Moo and Mega Cow are the only sellers of milk. Milky Moo’s supply function is
at prices above $0.50 and zero at prices below $0.50. Mega Cow’s supply
function is
at prices above $0.33 and zero at prices below $0.33. At a price of
$0.45
A. Milky Moo is the only supplier of milk
B. Mega Cow is the only supplier of milk
C. Both Milky Moo and Mega Cow supply milk
D. Neither Milky Moo nor Mega Cow supply milk
4. With free entry
A. The long run market supply curve is horizontal at the market price
B. The long run market supply curve is vertical at the market price
C. The short and long run market supply curves are the same
D. A and D
5. The market demand for milk is
. Additionally, suppose that a dairy’s variable
costs are
(where Q is the number of gallons of milk produced each day), its marginal
cost is
and there is an avoidable fixed cost of $50 per day. In the long run there is free
entry into the market. Suppose the demand for milk doubles. If in the short run the number of
firms is fixed and their fixed costs are sunk, what is each of the active firms’ profit per unit in the
short run equilibrium?
A. $4
B. $20
C. $24
D. $10
6. A monopoly market is
A. A market with many sellers
B. A market with a single seller
C. A market with a few sellers
D. B and C
7. Suppose Kate’s Great Crete (KGC) has annual variable costs of
and
marginal costs of
, where Q is the number of cubic yards of concrete it
produces per year. In addition, it has an avoidable fixed cost of $50,000 per year. KGC’s demand
function is
. What is the profit maximizing sales quantity?
A. 20
B. 2,000
C. 8,000
D. 0
8. A firm’s markup over its marginal cost is greater
A. The more elastic is the demand curve
B. The less elastic is the demand curve
C. The lower its fixed costs
D. The lower its average costs
9. The Solo Coal Mine is the only employer in the small town of Way out there. The market
supply of coal miners is
and
, where W is the annual
wage of a coal miner and Q is the number of coal miners. What is the profit maximizing number
of coal miners for the coal mine to hire?
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