Econ 102 Quiz 3 UPDATED Actual Exam
Questions and CORRECT Answers
Conditions of a perfectly competitive market - CORRECT ANSWER✔✔- 1. No buyer or
seller is big enough to impact price
2. Sellers produce identical goods
3. Entry and exit is free in the market
3 Problems Sellers Have - CORRECT ANSWER✔✔- 1. How to produce
2. What is the cost of making the product
3. How much profit can the seller make in the market
Firm - CORRECT ANSWER✔✔- Any business entity that produces and sells goods &
services
Production - CORRECT ANSWER✔✔- The process of turning inputs into outputs
Production Function - CORRECT ANSWER✔✔- Relationship between quantity of inputs
and quantity of outputs
Physical Capital - CORRECT ANSWER✔✔- Any good, including machines
Why does marginal product increase with the first workers? - CORRECT ANSWER✔✔-
Specialization; There are only a few specialized workers and there may not be enough
machines for more workers to use, so marginal production falls eventually
Why does marginal product fall - CORRECT ANSWER✔✔- Law of Diminishing Returns
Short Run: Total Cost - CORRECT ANSWER✔✔- Fixed Cost + Variable Cost
Variable Cost - CORRECT ANSWER✔✔- Cost of variable factors; changes as output
changes
Questions and CORRECT Answers
Conditions of a perfectly competitive market - CORRECT ANSWER✔✔- 1. No buyer or
seller is big enough to impact price
2. Sellers produce identical goods
3. Entry and exit is free in the market
3 Problems Sellers Have - CORRECT ANSWER✔✔- 1. How to produce
2. What is the cost of making the product
3. How much profit can the seller make in the market
Firm - CORRECT ANSWER✔✔- Any business entity that produces and sells goods &
services
Production - CORRECT ANSWER✔✔- The process of turning inputs into outputs
Production Function - CORRECT ANSWER✔✔- Relationship between quantity of inputs
and quantity of outputs
Physical Capital - CORRECT ANSWER✔✔- Any good, including machines
Why does marginal product increase with the first workers? - CORRECT ANSWER✔✔-
Specialization; There are only a few specialized workers and there may not be enough
machines for more workers to use, so marginal production falls eventually
Why does marginal product fall - CORRECT ANSWER✔✔- Law of Diminishing Returns
Short Run: Total Cost - CORRECT ANSWER✔✔- Fixed Cost + Variable Cost
Variable Cost - CORRECT ANSWER✔✔- Cost of variable factors; changes as output
changes
