Question 1

In the natural gas industry, recent technological improvements and the use of fracking have

Accepted Answer

A)  increased the demand for natural gas, causing its price to rise. 
B)  increased the supply of natural gas, causing its price to decline. 
C)  reduced the demand for natural gas even though the proved reserves of the resource have fallen. 
D)  resulted in sharply higher natural gas prices because of the dangers that accompany fracking. 
A)  increased the demand for natural gas, causing its price to rise. 
B)  increased the supply of natural gas, causing its price to decline. 
C)  reduced the demand for natural gas even though the proved reserves of the resource have fallen. 
D)  resulted in sharply higher natural gas prices because of the dangers that accompany fracking.

Question 2

If a price-searcher firm can sell nine units at a price of $6, or it can sell ten units at a price of $5.75, what is the marginal revenue of the tenth unit?

Accepted Answer

A)  $1 
B)  $3.50 
C)  $5.75 
D)  $6 
A)  $1 
B)  $3.50 
C)  $5.75 
D)  $6

Question 3

The classic resource study of Barnett and Morse found that

Accepted Answer

A)  resource costs have been rising at such a rate that, within fifty years, the prices of most natural resources will be exorbitant. 
B)  the current proved reserves of most minerals are becoming perilously low. 
C)  resource prices declined between 1870 and 1920, but since 1920 the relative price of natural resources has been increasing at an annual rate of approximately 3.5 percent. 
D)  technology and developing substitutes outran our use of scarce natural resources during the last century, so that relative resource prices have declined. 
A)  resource costs have been rising at such a rate that, within fifty years, the prices of most natural resources will be exorbitant. 
B)  the current proved reserves of most minerals are becoming perilously low. 
C)  resource prices declined between 1870 and 1920, but since 1920 the relative price of natural resources has been increasing at an annual rate of approximately 3.5 percent. 
D)  technology and developing substitutes outran our use of scarce natural resources during the last century, so that relative resource prices have declined.

Question 4

Figure 10-11        
-Refer to Figure 10-11. Which of the graphs shown would be consistent with a firm in a competitive price-searcher market that is maximizing profit but profit is still negative?

Accepted Answer

A)  Panel a 
B)  Panel b 
C)  Panel c 
D)  Panel d 
A)  Panel a 
B)  Panel b 
C)  Panel c 
D)  Panel d

Question 5

When entry barriers are low, firms in a competitive price-searcher market

Accepted Answer

A)  can expect many new rivals to enter regardless of current profitability. 
B)  can expect competing firms to enter the market if the activity is profitable. 
C)  can never earn economic profit. 
D)  will always be able to earn economic profit. 
A)  can expect many new rivals to enter regardless of current profitability. 
B)  can expect competing firms to enter the market if the activity is profitable. 
C)  can never earn economic profit. 
D)  will always be able to earn economic profit.

Question 6

Suppose that competitive price-searcher firms are experiencing losses. In the transition from this initial situation to a long-run equilibrium,

Accepted Answer

A)  the number of firms in the market decreases. 
B)  each existing firm experiences a decrease in demand for its product. 
C)  each firm experiences an upward shift to its marginal cost and average total cost curves. 
D)  each existing firm's average total cost falls to bring economic profit back to zero. 
A)  the number of firms in the market decreases. 
B)  each existing firm experiences a decrease in demand for its product. 
C)  each firm experiences an upward shift to its marginal cost and average total cost curves. 
D)  each existing firm's average total cost falls to bring economic profit back to zero.

Question 7

If a price searcher is producing at a level of output such that its marginal cost is $16 and its marginal revenue is $9, the firm should

Accepted Answer

A)  increase output in order to reduce per-unit costs. 
B)  decrease the price of its product and expand output. 
C)  increase price and reduce its rate of output. 
D)  reduce both price and output. 
A)  increase output in order to reduce per-unit costs. 
B)  decrease the price of its product and expand output. 
C)  increase price and reduce its rate of output. 
D)  reduce both price and output.

Question 8

If a market is in long-run equilibrium, which of the following conditions will be present in a competitive price-taker market but absent from a competitive price-searcher market?

Accepted Answer

A)  P = ATC 
B)  MR = MC 
C)  P = MC 
D)  MR < P 
A)  P = ATC 
B)  MR = MC 
C)  P = MC 
D)  MR < P

Question 9

Which of the following would be most likely if firms in a competitive price-searcher market were earning economic profit?

Accepted Answer

A)  Production inefficiencies would persist until the profit was eliminated. 
B)  Firms would decrease their rate of output in the short run, causing a decline in profitability in the market. 
C)  New firms would enter the market, resulting in fewer sales by existing firms. 
D)  All firms in the market would continue to produce at their current levels and continue to charge the same price. 
A)  Production inefficiencies would persist until the profit was eliminated. 
B)  Firms would decrease their rate of output in the short run, causing a decline in profitability in the market. 
C)  New firms would enter the market, resulting in fewer sales by existing firms. 
D)  All firms in the market would continue to produce at their current levels and continue to charge the same price.

Question 10

If the prices of energy products rise sharply, consumers will most likely

Accepted Answer

A)  sharply reduce their consumption of these products in both the short run and the long run. 
B)  reduce their consumption of these products slightly in the short run and more sharply in the long run. 
C)  reduce their consumption of these products sharply in the short run, but in the long run consumption will fall by only a small amount. 
D)  increase their consumption of these products slightly in the short run and more sharply in the long run. 
A)  sharply reduce their consumption of these products in both the short run and the long run. 
B)  reduce their consumption of these products slightly in the short run and more sharply in the long run. 
C)  reduce their consumption of these products sharply in the short run, but in the long run consumption will fall by only a small amount. 
D)  increase their consumption of these products slightly in the short run and more sharply in the long run.

Question 11

In the United States, water purchases from the government

Accepted Answer

A)  always cover the costs of water delivery. 
B)  are often subsidized for the user of water. 
C)  are not subsidized, because that would be inefficient. 
D)  almost never occur. 
A)  always cover the costs of water delivery. 
B)  are often subsidized for the user of water. 
C)  are not subsidized, because that would be inefficient. 
D)  almost never occur.

Question 12

Figure 10-11        
-Refer to Figure 10-11. Which of the graphs shown would be consistent with a firm in a competitive price-searcher market that is earning a positive profit?

Accepted Answer

A)  Panel a 
B)  Panel b 
C)  Panel c 
D)  Panel d 
A)  Panel a 
B)  Panel b 
C)  Panel c 
D)  Panel d

Question 13

A price searcher confronts a downward sloping demand curve because

Accepted Answer

A)  products in the market are differentiated. 
B)  there is no close competitor in the market. 
C)  the market is essentially monopolized. 
D)  the firm gains nothing if it lowers its price. 
A)  products in the market are differentiated. 
B)  there is no close competitor in the market. 
C)  the market is essentially monopolized. 
D)  the firm gains nothing if it lowers its price.

Question 14

If a movie theater is going to gain by charging students a dollar less than other customers,

Accepted Answer

A)  the demand of students must be more elastic than that of other customers. 
B)  the demand of students must be less elastic than that of other customers. 
C)  students must have higher incomes than other customers. 
D)  other customers must enjoy movies more than students. 
A)  the demand of students must be more elastic than that of other customers. 
B)  the demand of students must be less elastic than that of other customers. 
C)  students must have higher incomes than other customers. 
D)  other customers must enjoy movies more than students.

Question 15

Doomsday forecasts projecting that a consumable resource will soon be depleted, fail to account for

Accepted Answer

A)  government regulation of the resource. 
B)  public pressure to conserve usage of the resource. 
C)  the role of prices in conservation; as the supply of the resource decreases, the price increases and people will turn to alternative resources. 
D)  supply and demand; as supply of a resource decreases, the demand will also decrease. 
A)  government regulation of the resource. 
B)  public pressure to conserve usage of the resource. 
C)  the role of prices in conservation; as the supply of the resource decreases, the price increases and people will turn to alternative resources. 
D)  supply and demand; as supply of a resource decreases, the demand will also decrease.

Question 16

Which of the following variables is left out of the simple economic model of the firm?

Accepted Answer

A)  the marginal cost of production 
B)  consumer tastes and preferences 
C)  the fact that many firms actually earn profits 
D)  the entrepreneurial decision-making process 
A)  the marginal cost of production 
B)  consumer tastes and preferences 
C)  the fact that many firms actually earn profits 
D)  the entrepreneurial decision-making process

Question 17

Which of the following is true about the demand and supply of natural resources?

Accepted Answer

A)  The quantity demanded of a natural resource will generally be more responsive to a change in price in the long run than in the short run. 
B)  The future supply of a natural resource will fall when current prices for that resource rise. 
C)  The supply of a natural resource is fixed by nature; it cannot be responsive to a price change in the long run. 
D)  None of the above is correct. 
A)  The quantity demanded of a natural resource will generally be more responsive to a change in price in the long run than in the short run. 
B)  The future supply of a natural resource will fall when current prices for that resource rise. 
C)  The supply of a natural resource is fixed by nature; it cannot be responsive to a price change in the long run. 
D)  None of the above is correct.

Question 18

Price searchers can be expected to charge a price that

Accepted Answer

A)  is the highest at which consumers will purchase any units. 
B)  they expect to provide the largest possible flow of gross revenue. 
C)  minimizes their per-unit costs of production. 
D)  maximizes their profit. 
A)  is the highest at which consumers will purchase any units. 
B)  they expect to provide the largest possible flow of gross revenue. 
C)  minimizes their per-unit costs of production. 
D)  maximizes their profit.

Question 19

When a profit-maximizing firm in a competitive price-searcher market is in long-run equilibrium, price equals

Accepted Answer

A)  marginal cost, and profits are positive. 
B)  average total cost, and profits are zero. 
C)  marginal cost, and profits are zero. 
D)  average total cost, and profits are positive. 
A)  marginal cost, and profits are positive. 
B)  average total cost, and profits are zero. 
C)  marginal cost, and profits are zero. 
D)  average total cost, and profits are positive.

Question 20

Figure 10-7  
-Given the cost and demand conditions shown in Figure 10-7 for the competitive price-searcher firm, what price should it charge, and what quantity should it produce in order to maximize profit?

Accepted Answer

A)  It should produce 10 units and charge a price of $5 per unit. 
B)  It should produce 10 units and charge a price of $8 per unit. 
C)  It should produce 10 units and charge a price of $10 per unit. 
D)  It should produce 18 units and charge a price of $7 per unit. 
A)  It should produce 10 units and charge a price of $5 per unit. 
B)  It should produce 10 units and charge a price of $8 per unit. 
C)  It should produce 10 units and charge a price of $10 per unit. 
D)  It should produce 18 units and charge a price of $7 per unit.

In the natural gas industry, recent technological improvements and the use of fracking have

If a price-searcher firm can sell nine units at a price of $6, or it can sell ten units at a price of $5.75, what is the marginal revenue of the tenth unit?

The classic resource study of Barnett and Morse found that

Figure 10-11 -Refer to Figure 10-11. Which of the graphs shown would be consistent with a firm in a competitive price-searcher market that is maximizing profit but profit is still negative?

When entry barriers are low, firms in a competitive price-searcher market

Suppose that competitive price-searcher firms are experiencing losses. In the transition from this initial situation to a long-run equilibrium,

If a price searcher is producing at a level of output such that its marginal cost is $16 and its marginal revenue is $9, the firm should

If a market is in long-run equilibrium, which of the following conditions will be present in a competitive price-taker market but absent from a competitive price-searcher market?

Which of the following would be most likely if firms in a competitive price-searcher market were earning economic profit?

If the prices of energy products rise sharply, consumers will most likely

In the United States, water purchases from the government

Figure 10-11 -Refer to Figure 10-11. Which of the graphs shown would be consistent with a firm in a competitive price-searcher market that is earning a positive profit?

A price searcher confronts a downward sloping demand curve because

If a movie theater is going to gain by charging students a dollar less than other customers,

Doomsday forecasts projecting that a consumable resource will soon be depleted, fail to account for

Which of the following variables is left out of the simple economic model of the firm?

Which of the following is true about the demand and supply of natural resources?

Price searchers can be expected to charge a price that

When a profit-maximizing firm in a competitive price-searcher market is in long-run equilibrium, price equals

Figure 10-7 -Given the cost and demand conditions shown in Figure 10-7 for the competitive price-searcher firm, what price should it charge, and what quantity should it produce in order to maximize profit?

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

In the natural gas industry, recent technological improvements and the use of fracking have

If a price-searcher firm can sell nine units at a price of $6, or it can sell ten units at a price of $5.75, what is the marginal revenue of the tenth unit?

The classic resource study of Barnett and Morse found that

Figure 10-11 -Refer to Figure 10-11. Which of the graphs shown would be consistent with a firm in a competitive price-searcher market that is maximizing profit but profit is still negative?

When entry barriers are low, firms in a competitive price-searcher market

Suppose that competitive price-searcher firms are experiencing losses. In the transition from this initial situation to a long-run equilibrium,

If a price searcher is producing at a level of output such that its marginal cost is $16 and its marginal revenue is $9, the firm should

If a market is in long-run equilibrium, which of the following conditions will be present in a competitive price-taker market but absent from a competitive price-searcher market?

Which of the following would be most likely if firms in a competitive price-searcher market were earning economic profit?

If the prices of energy products rise sharply, consumers will most likely

In the United States, water purchases from the government

Figure 10-11 -Refer to Figure 10-11. Which of the graphs shown would be consistent with a firm in a competitive price-searcher market that is earning a positive profit?

A price searcher confronts a downward sloping demand curve because

If a movie theater is going to gain by charging students a dollar less than other customers,

Doomsday forecasts projecting that a consumable resource will soon be depleted, fail to account for

Which of the following variables is left out of the simple economic model of the firm?

Which of the following is true about the demand and supply of natural resources?

Price searchers can be expected to charge a price that

When a profit-maximizing firm in a competitive price-searcher market is in long-run equilibrium, price equals

Figure 10-7 -Given the cost and demand conditions shown in Figure 10-7 for the competitive price-searcher firm, what price should it charge, and what quantity should it produce in order to maximize profit?

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