Question 1

Price discrimination occurs when

Accepted Answer

A)  firms maximize their profit by setting price equal to marginal cost. 
B)  a seller charges different prices to different consumers for the same product or service. 
C)  a seller charges the same price to consumers for a different product or service. 
D)  a seller charges different prices to consumers, discriminating by race or gender of the consumer. 
A)  firms maximize their profit by setting price equal to marginal cost. 
B)  a seller charges different prices to different consumers for the same product or service. 
C)  a seller charges the same price to consumers for a different product or service. 
D)  a seller charges different prices to consumers, discriminating by race or gender of the consumer. B

Question 2

Whenever firms can freely enter and exit a market,

Accepted Answer

A)  firms can never earn a profit. 
B)  prices will be the same for all firms in the market. 
C)  products will be identical for all firms in the market. 
D)  profits and losses play an important role in determining the size of the industry. 
A)  firms can never earn a profit. 
B)  prices will be the same for all firms in the market. 
C)  products will be identical for all firms in the market. 
D)  profits and losses play an important role in determining the size of the industry. D

Question 3

Use the figure to answer the following question(s).
Figure 10-4  
-What is the maximum economic profit this firm depicted in Figure 10-4 will be able to earn?

Accepted Answer

A)  $200 loss 
B)  zero profit 
C)  $250 profit 
D)  $700 profit 
A)  $200 loss 
B)  zero profit 
C)  $250 profit 
D)  $700 profit A

Question 4

Which of the following about price discrimination is true?

Accepted Answer

A)  A price-discriminating seller will charge consumers with an elastic demand a lower price than consumers with an inelastic demand. 
B)  A firm must face a horizontal demand curve for its product in order to engage in effective price discrimination in a market. 
C)  Price discrimination always harms consumers and helps sellers in the short run but in the long run, consumers benefit at the expense of sellers. 
D)  A seller must have a monopoly in order to gain from price discrimination. 
A)  A price-discriminating seller will charge consumers with an elastic demand a lower price than consumers with an inelastic demand. 
B)  A firm must face a horizontal demand curve for its product in order to engage in effective price discrimination in a market. 
C)  Price discrimination always harms consumers and helps sellers in the short run but in the long run, consumers benefit at the expense of sellers. 
D)  A seller must have a monopoly in order to gain from price discrimination.

Question 5

Non-renewable resources are those that

Accepted Answer

A)  are not renewed by nature, but their supply can be easily expanded by humans. 
B)  are naturally renewed by nature; timber provides an example. 
C)  are not renewed by nature at a significant rate. 
D)  cannot be recycled, by their very nature. 
A)  are not renewed by nature, but their supply can be easily expanded by humans. 
B)  are naturally renewed by nature; timber provides an example. 
C)  are not renewed by nature at a significant rate. 
D)  cannot be recycled, by their very nature.

Question 6

Use the figure to answer the following question(s).
Figure 10-2  
-If the cost and demand conditions of this competitive price-searcher firm depicted in Figure 10-2 are representative of the market, what will happen in the future?

Accepted Answer

A)  Firms will go out of business, and the market price will rise. 
B)  The current market price will tend to persist into the future. 
C)  New firms will enter the market, and demand facing this firm will decline. 
D)  The firms in this industry probably will collude in order to increase their profitability. 
A)  Firms will go out of business, and the market price will rise. 
B)  The current market price will tend to persist into the future. 
C)  New firms will enter the market, and demand facing this firm will decline. 
D)  The firms in this industry probably will collude in order to increase their profitability.

Question 7

If firms in a competitive price-searcher market are earning economic profits, which of the following scenarios would best describe the change existing firms would face as the market adjusts to long-run equilibrium?

Accepted Answer

A)  An increase in demand for each firm and lower prices. 
B)  A decrease in demand for each firm and lower prices. 
C)  An increase in demand for each firm and higher prices. 
D)  A decrease in demand for each firm and higher prices. 
A)  An increase in demand for each firm and lower prices. 
B)  A decrease in demand for each firm and lower prices. 
C)  An increase in demand for each firm and higher prices. 
D)  A decrease in demand for each firm and higher prices.

Question 8

The free entry and exit of firms in a competitive price-searcher market guarantees that

Accepted Answer

A)  both economic profits and economic losses can persist in the long run. 
B)  both economic profits and economic losses disappear in the long run. 
C)  economic profits, but not economic losses, can persist in the long run. 
D)  economic losses, but not economic profits, can persist in the long run. 
A)  both economic profits and economic losses can persist in the long run. 
B)  both economic profits and economic losses disappear in the long run. 
C)  economic profits, but not economic losses, can persist in the long run. 
D)  economic losses, but not economic profits, can persist in the long run.

Question 9

When profits exist in a competitive price-searcher market,

Accepted Answer

A)  rival firms will be attracted into the market. 
B)  high barriers to entry will prevent rival firms from entering the market. 
C)  product differentiation will prevent new firms from making a profit. 
D)  the profits will persist because the firms face a downward-sloping demand curve. 
A)  rival firms will be attracted into the market. 
B)  high barriers to entry will prevent rival firms from entering the market. 
C)  product differentiation will prevent new firms from making a profit. 
D)  the profits will persist because the firms face a downward-sloping demand curve.

Question 10

When the price of gasoline increases substantially, many consumers will

Accepted Answer

A)  turn to fuel saving alternatives like hybrid vehicles. 
B)  drive less. 
C)  take public transportation. 
D)  all of the above are true. 
A)  turn to fuel saving alternatives like hybrid vehicles. 
B)  drive less. 
C)  take public transportation. 
D)  all of the above are true.

Question 11

Natural gas prices in real terms have

Accepted Answer

A)  increased sharply since 2008. 
B)  closely followed the pattern of oil prices since 2008. 
C)  risen dramatically during the past ten years. 
D)  fallen sharply since 2008. 
A)  increased sharply since 2008. 
B)  closely followed the pattern of oil prices since 2008. 
C)  risen dramatically during the past ten years. 
D)  fallen sharply since 2008.

Question 12

Firms that engage in price discrimination

Accepted Answer

A)  will earn less profit than those that do not discriminate. 
B)  will earn more profit than those that do not discriminate. 
C)  are biased against certain buyers in the market. 
D)  will always produce less output than firms that do not discriminate. 
A)  will earn less profit than those that do not discriminate. 
B)  will earn more profit than those that do not discriminate. 
C)  are biased against certain buyers in the market. 
D)  will always produce less output than firms that do not discriminate.

Question 13

Use the figure to answer the following question(s).
Figure 10-2  
-What price should a competitive price-searcher firm with the cost and demand conditions depicted in Figure 10-2 charge if it wants to maximize its profit?

Accepted Answer

A)  $5 
B)  $7 
C)  $8 
D)  $10 
A)  $5 
B)  $7 
C)  $8 
D)  $10

Question 14

If a firm in a competitive price-searcher market finds that its marginal cost exceeds its marginal revenue at the current rate of output, it should

Accepted Answer

A)  raise the price of the product and expand its output. 
B)  raise the price of the product and reduce its output. 
C)  lower the price of the product and expand its output. 
D)  lower the price of the product and reduce its output. 
A)  raise the price of the product and expand its output. 
B)  raise the price of the product and reduce its output. 
C)  lower the price of the product and expand its output. 
D)  lower the price of the product and reduce its output.

Question 15

Use the figure to answer the following question(s).
Figure 10-5  
-Given the cost and demand conditions shown in Figure 10-5 for the competitive price-searcher firm, what is the level of output it should produce to maximize its profit?

Accepted Answer

A)  1 
B)  2 
C)  3 
D)  4 
A)  1 
B)  2 
C)  3 
D)  4

Question 16

Compared to the outcome when the firms are price takers, competitive price-searcher markets will result in

Accepted Answer

A)  a wider variety of products and higher prices. 
B)  less product variety and higher prices. 
C)  a wider variety of products and lower prices. 
D)  less product variety and lower prices. 
A)  a wider variety of products and higher prices. 
B)  less product variety and higher prices. 
C)  a wider variety of products and lower prices. 
D)  less product variety and lower prices.

Question 17

In the long run, neither competitive price takers nor competitive price searchers will be able to earn economic profits because

Accepted Answer

A)  entry barriers into these markets are high, raising the costs of each firm. 
B)  the government will dictate moderate prices for these firms. 
C)  competition will force prices down to the level of per-unit production costs. 
D)  marginal revenue is always less than marginal cost when barriers to entry are low. 
A)  entry barriers into these markets are high, raising the costs of each firm. 
B)  the government will dictate moderate prices for these firms. 
C)  competition will force prices down to the level of per-unit production costs. 
D)  marginal revenue is always less than marginal cost when barriers to entry are low.

Question 18

When a highly valued resource cannot be easily traded, as is often true with water flowing in a river, then

Accepted Answer

A)  it will not be hoarded by the rich, but will be available to all on an equal basis. 
B)  we can expect shortages from time to time, and conflicts over access to its use. 
C)  its price will be low as a result. 
D)  markets in the resource will clear more easily, without greed and profit to get in the way. 
A)  it will not be hoarded by the rich, but will be available to all on an equal basis. 
B)  we can expect shortages from time to time, and conflicts over access to its use. 
C)  its price will be low as a result. 
D)  markets in the resource will clear more easily, without greed and profit to get in the way.

Question 19

Competitive price-searcher markets are common in

Accepted Answer

A)  retail selling. 
B)  farming. 
C)  basic manufacturing. 
D)  electric power generation. 
A)  retail selling. 
B)  farming. 
C)  basic manufacturing. 
D)  electric power generation.

Question 20

Which of the following most closely approximates the conditions of a competitive price-searcher market?

Accepted Answer

A)  the market for Grade A eggs, which is characterized by a large number of firms producing a homogeneous product 
B)  the restaurant industry, which is characterized by firms producing a differentiated product in a market with low entry barriers 
C)  local cable television service, where a licensed supplier competes with firms offering satellite service 
D)  the market for jumbo aircraft, where one major domestic firm competes with one major foreign firm 
A)  the market for Grade A eggs, which is characterized by a large number of firms producing a homogeneous product 
B)  the restaurant industry, which is characterized by firms producing a differentiated product in a market with low entry barriers 
C)  local cable television service, where a licensed supplier competes with firms offering satellite service 
D)  the market for jumbo aircraft, where one major domestic firm competes with one major foreign firm

Price discrimination occurs when

Whenever firms can freely enter and exit a market,

Use the figure to answer the following question(s). Figure 10-4 -What is the maximum economic profit this firm depicted in Figure 10-4 will be able to earn?

Which of the following about price discrimination is true?

Non-renewable resources are those that

Use the figure to answer the following question(s). Figure 10-2 -If the cost and demand conditions of this competitive price-searcher firm depicted in Figure 10-2 are representative of the market, what will happen in the future?

If firms in a competitive price-searcher market are earning economic profits, which of the following scenarios would best describe the change existing firms would face as the market adjusts to long-run equilibrium?

The free entry and exit of firms in a competitive price-searcher market guarantees that

When profits exist in a competitive price-searcher market,

When the price of gasoline increases substantially, many consumers will

Natural gas prices in real terms have

Firms that engage in price discrimination

Use the figure to answer the following question(s). Figure 10-2 -What price should a competitive price-searcher firm with the cost and demand conditions depicted in Figure 10-2 charge if it wants to maximize its profit?

If a firm in a competitive price-searcher market finds that its marginal cost exceeds its marginal revenue at the current rate of output, it should

Use the figure to answer the following question(s). Figure 10-5 -Given the cost and demand conditions shown in Figure 10-5 for the competitive price-searcher firm, what is the level of output it should produce to maximize its profit?

Compared to the outcome when the firms are price takers, competitive price-searcher markets will result in

In the long run, neither competitive price takers nor competitive price searchers will be able to earn economic profits because

When a highly valued resource cannot be easily traded, as is often true with water flowing in a river, then

Competitive price-searcher markets are common in

Which of the following most closely approximates the conditions of a competitive price-searcher market?

The Economic Approach

Some Tools of the Economist

Demand, Supply, and the Market Process

Supply and Demand: Applications and Extensions

Difficult Cases for the Market, and the Role of Government

The Economics of Political Action

Consumer Choice and Elasticity

Costs and the Supply of Goods

Price Takers and the Competitive Process

Price-Searcher Markets With High Entry Barriers

The Supply of and Demand for Productive Resources

Earnings, Productivity, and the Job Market

Investment, the Capital Market, and the Wealth of Nations

Income Inequality and Poverty

Gaining From International Trade

Filters

Exam 10: Price-Searcher Markets With Low Entry Barriers

Price discrimination occurs when

Whenever firms can freely enter and exit a market,

Use the figure to answer the following question(s). Figure 10-4 -What is the maximum economic profit this firm depicted in Figure 10-4 will be able to earn?

Which of the following about price discrimination is true?

Non-renewable resources are those that

Use the figure to answer the following question(s). Figure 10-2 -If the cost and demand conditions of this competitive price-searcher firm depicted in Figure 10-2 are representative of the market, what will happen in the future?

If firms in a competitive price-searcher market are earning economic profits, which of the following scenarios would best describe the change existing firms would face as the market adjusts to long-run equilibrium?

The free entry and exit of firms in a competitive price-searcher market guarantees that

When profits exist in a competitive price-searcher market,

When the price of gasoline increases substantially, many consumers will

Natural gas prices in real terms have

Firms that engage in price discrimination

Use the figure to answer the following question(s). Figure 10-2 -What price should a competitive price-searcher firm with the cost and demand conditions depicted in Figure 10-2 charge if it wants to maximize its profit?

If a firm in a competitive price-searcher market finds that its marginal cost exceeds its marginal revenue at the current rate of output, it should

Use the figure to answer the following question(s). Figure 10-5 -Given the cost and demand conditions shown in Figure 10-5 for the competitive price-searcher firm, what is the level of output it should produce to maximize its profit?

Compared to the outcome when the firms are price takers, competitive price-searcher markets will result in

In the long run, neither competitive price takers nor competitive price searchers will be able to earn economic profits because

When a highly valued resource cannot be easily traded, as is often true with water flowing in a river, then

Competitive price-searcher markets are common in

Which of the following most closely approximates the conditions of a competitive price-searcher market?

The Economic Approach

Some Tools of the Economist

Demand, Supply, and the Market Process

Supply and Demand: Applications and Extensions

Difficult Cases for the Market, and the Role of Government

The Economics of Political Action

Consumer Choice and Elasticity

Costs and the Supply of Goods

Price Takers and the Competitive Process

Price-Searcher Markets With High Entry Barriers

The Supply of and Demand for Productive Resources

Earnings, Productivity, and the Job Market

Investment, the Capital Market, and the Wealth of Nations

Income Inequality and Poverty

Gaining From International Trade

Filters