1.In a perfectly competitive market, all of the following are true EXCEPT: buyer
ID: 1095738 • Letter: 1
Question
1.In a perfectly competitive market, all of the following are true EXCEPT:
buyers take prices as given.
2. In a perfectly competitive market:
buyers are price setters.
3.Graphically, market supply for a product:
is the vertical sum of the individual supply curves.
4.With free entry:
the long run market demand curve is horizontal at the market price.
5.Suppose that, in the long run, a dairy's variable costs are VC = 2Q2 (where Q is the number of gallons of milk produced each day), its marginal cost is MC = 4Q 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?
TC = 2Q2 + 4Q + 50
6.
Suppose that, in the long run, a dairy's variable costs are VC = 2Q2 (where Q is the number of gallons of milk produced each day), its marginal cost is MC = 4Q 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 (the Minimum of Average cost)?
50 gallons per day
7.
Suppose that, in the long run, a dairy's variable costs are VC = 2Q2 (where Q is the number of gallons of milk produced each day), its marginal cost is MC = 4Q and there is an avoidable fixed cost of $50 per day. In the long run there is free entry into the market and suppose this is a constant cost industry. The long run market supply curve is:
horizontal at $100 per gallon.
8.Properties of long-run competitive equilibrium with free entry include:
All of these are properties of long-run competitive equilibrium
9.Aggregate surplus:
is equal to zero in the long run.
10.A deadweight loss:
is equal to the difference between total willingness to pay and the total avoidable cost of production.
11.
b. What is the market supply curve under free entry ? Suppose this is a constant cost industry
A vertical line at AC = $7.00.
12.The market demand function for ice cream cones is Qd = 18.5 4.4P.
The market supply function for ice cream cones is
QS = 12P 25
a. What is the equilibrium price in the market for ice cream cones?
Instructions: Round your answer to 2 decimal places.
$.
b. What is the equilibrium quantity in the market for ice cream cones?
Instructions: Round your answer to the nearest whole number.
.13.
15.
The market demand function for corn is
Qd = 18 - 3P
The market supply function is
QS = 3P - 3
both quantities measured in billions of bushels per year.
Instructions: Round all quantities to the nearest whole number and prices to 2 decimal places.
a. What is consumer surplus at the competitive market equilibrium?
$.
b. What is producer surplus at the competitive market equilibrium?
$.
c. What is aggregate surplus at this equilibrium?
$.
buyers take prices as given.
2. In a perfectly competitive market:
firms are price setters. firms produce the quantity for which marginal cost equals price. firms can increase profits by charging a price higher than the market price.buyers are price setters.
3.Graphically, market supply for a product:
is the horizontal difference of the individual supply curves. is the horizontal sum of the individual supply curves. is the vertical difference of the individual supply curves.is the vertical sum of the individual supply curves.
4.With free entry:
there is a known and limited number of potential suppliers that can produce a good in the long run. there is an unlimited number of firms that can produce a good in the long run. the long run market supply curve is vertical at the market quantity.the long run market demand curve is horizontal at the market price.
5.Suppose that, in the long run, a dairy's variable costs are VC = 2Q2 (where Q is the number of gallons of milk produced each day), its marginal cost is MC = 4Q 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?
TC = 2Q2 + 4Q TC = 4Q + 50 TC = 2Q2 + 50TC = 2Q2 + 4Q + 50
6.
Suppose that, in the long run, a dairy's variable costs are VC = 2Q2 (where Q is the number of gallons of milk produced each day), its marginal cost is MC = 4Q 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 (the Minimum of Average cost)?
5 gallons per day 100 gallons per day 20 gallons per day50 gallons per day
7.
Suppose that, in the long run, a dairy's variable costs are VC = 2Q2 (where Q is the number of gallons of milk produced each day), its marginal cost is MC = 4Q and there is an avoidable fixed cost of $50 per day. In the long run there is free entry into the market and suppose this is a constant cost industry. The long run market supply curve is:
vertical at 5 gallons per day. horizontal at $20 per gallon. horizontal at $50 per gallon.horizontal at $100 per gallon.
8.Properties of long-run competitive equilibrium with free entry include:
an equilibrium price equal to the minimum AC. firms earning zero profits. active firms producing at their efficient scales of production.All of these are properties of long-run competitive equilibrium
9.Aggregate surplus:
is the sum of total willingness to pay and total avoidable costs of production. is minimized under perfect competition. is the sum of consumer and producer surpluses.is equal to zero in the long run.
10.A deadweight loss:
can be large in a perfectly competitive market. is a reduction in aggregate surplus below its maximum possible value. is independent the amount produced and consumed.is equal to the difference between total willingness to pay and the total avoidable cost of production.
11.
The daily cost of producing pizza in New Haven is
The marginal cost is
a. What is the market supply function if there are 16 firms making pizza?
b. What is the market supply curve under free entry ? Suppose this is a constant cost industry
A vertical line at AC = $7.00.
12.The market demand function for ice cream cones is Qd = 18.5 4.4P.
The market supply function for ice cream cones is
QS = 12P 25
a. What is the equilibrium price in the market for ice cream cones?
Instructions: Round your answer to 2 decimal places.
$.
b. What is the equilibrium quantity in the market for ice cream cones?
Instructions: Round your answer to the nearest whole number.
.13.
15.
The market demand function for corn is
Qd = 18 - 3P
The market supply function is
QS = 3P - 3
both quantities measured in billions of bushels per year.
Instructions: Round all quantities to the nearest whole number and prices to 2 decimal places.
a. What is consumer surplus at the competitive market equilibrium?
$.
b. What is producer surplus at the competitive market equilibrium?
$.
c. What is aggregate surplus at this equilibrium?
$.
Explanation / Answer
1.
Firms can increase profits by charging a price higher than the market price.
2.
Firms produce the quantity for which marginal cost equals price.
3.
Horizontal sum of the individual supply curves.
4.
There are an unlimited number of firms that can produce a good in the long run.
5.
TC = 2Q2 + 50
6.
ATC = MC will give Q = 5
7.
Vertical at maximum output Q=5
8.
All of these are properties of long-run competitive equilibrium
9.
Is the sum of consumer and producer surpluses
10.
Is a reduction in aggregate surplus below its maximum possible value.
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