Question 1

Why do airlines often charge students and vacationers a lower price than business travelers?

Accepted Answer

A)  It is cheaper to provide airline service to students and vacationers than to business travelers. 
B)  The demand of business travelers is generally more elastic than the demand of students and vacationers. 
C)  The demand of students and vacationers is generally more elastic than the demand of business travelers. 
D)  Airlines prefer to deal with students and vacationers rather than business travelers. 
A)  It is cheaper to provide airline service to students and vacationers than to business travelers. 
B)  The demand of business travelers is generally more elastic than the demand of students and vacationers. 
C)  The demand of students and vacationers is generally more elastic than the demand of business travelers. 
D)  Airlines prefer to deal with students and vacationers rather than business travelers.

Question 2

Which of the following is a true statement?

Accepted Answer

A)  A price-taker firm can sell additional units of output without having to lower its price, while a price-searcher firm must lower its price in order to sell additional units. 
B)  A price-searcher firm can sell additional units of output without having to lower its price, while a price-taker firm must lower its price in order to sell additional units. 
C)  Both price searchers and price takers can sell additional units of output without having to lower their price. 
D)  Both price searchers and price takers must lower their price in order to sell additional units of output. 
A)  A price-taker firm can sell additional units of output without having to lower its price, while a price-searcher firm must lower its price in order to sell additional units. 
B)  A price-searcher firm can sell additional units of output without having to lower its price, while a price-taker firm must lower its price in order to sell additional units. 
C)  Both price searchers and price takers can sell additional units of output without having to lower their price. 
D)  Both price searchers and price takers must lower their price in order to sell additional units of output.

Question 3

The firms in a competitive price-searcher market produce goods and services that are

Accepted Answer

A)  identical to one another in quality and price. 
B)  identical to one another in quality but not in price. 
C)  identical to one another in price but not in quality. 
D)  different from one another. 
A)  identical to one another in quality and price. 
B)  identical to one another in quality but not in price. 
C)  identical to one another in price but not in quality. 
D)  different from one another.

Question 4

A practice whereby a seller charges different prices to different consumers of the same product or service is called

Accepted Answer

A)  price discrimination. 
B)  oligopolistic pricing. 
C)  stay-out pricing. 
D)  monopolistic pricing. 
A)  price discrimination. 
B)  oligopolistic pricing. 
C)  stay-out pricing. 
D)  monopolistic pricing.

Question 5

Economic theory indicates that the economy is better off not to produce proved reserves of a mineral "too quickly." By this, the theory means that

Accepted Answer

A)  people prefer some bad luck in exploration efforts, rather than too much good luck in finding the resources. 
B)  society does not want the resource to be too abundantly available since this would reduce its price and GDP. 
C)  other nations' resources should be used first, even if doing so is more costly. 
D)  using additional resources for exploration is a harmful decision if the present discounted value of the benefits is smaller than the cost. 
A)  people prefer some bad luck in exploration efforts, rather than too much good luck in finding the resources. 
B)  society does not want the resource to be too abundantly available since this would reduce its price and GDP. 
C)  other nations' resources should be used first, even if doing so is more costly. 
D)  using additional resources for exploration is a harmful decision if the present discounted value of the benefits is smaller than the cost.

Question 6

If a government wanted to increase the prosperity of a nation, it could best serve this goal by

Accepted Answer

A)  protecting domestic industries from international trade, thus encouraging domestic growth. 
B)  regulating the way in which firms can operate. 
C)  reducing barriers that restrict the ability of potential competitors to enter markets. 
D)  subsidizing firms that are in danger of going out of business. 
A)  protecting domestic industries from international trade, thus encouraging domestic growth. 
B)  regulating the way in which firms can operate. 
C)  reducing barriers that restrict the ability of potential competitors to enter markets. 
D)  subsidizing firms that are in danger of going out of business.

Question 7

Higher prices for natural resources are

Accepted Answer

A)  a natural and inevitable result of resource depletion. 
B)  not possible for more than a short time, as technological advances clearly guarantee falling resource prices. 
C)  not the story of the last two centuries, because resource prices have declined through most of this period. 
D)  the major cause of resource shortages in the world. 
A)  a natural and inevitable result of resource depletion. 
B)  not possible for more than a short time, as technological advances clearly guarantee falling resource prices. 
C)  not the story of the last two centuries, because resource prices have declined through most of this period. 
D)  the major cause of resource shortages in the world.

Question 8

The fact that barriers to entry are low in competitive price-searcher markets means that if current firms are making economic losses,

Accepted Answer

A)  these losses will remain in the long run because no firms can exit the market. 
B)  current firms will exit the market, causing the demand curves that face the remaining firms to increase. 
C)  new firms will enter the market, causing the demand curves that face the existing firms to decrease. 
D)  new firms will enter the market, causing no change in the demand curves that face the existing firms in the market. 
A)  these losses will remain in the long run because no firms can exit the market. 
B)  current firms will exit the market, causing the demand curves that face the remaining firms to increase. 
C)  new firms will enter the market, causing the demand curves that face the existing firms to decrease. 
D)  new firms will enter the market, causing no change in the demand curves that face the existing firms in the market.

Question 9

Data on world reserves of minerals, gathered by Blackman and Baumol, show that between 1950 and 2000, production of most minerals

Accepted Answer

A)  greatly exceeded the reserves available in 1950. 
B)  declined as depletion occurred. 
C)  greatly reduced the reserves available in 2000. 
D)  was limited to a fraction of the reserves available in 1950. 
A)  greatly exceeded the reserves available in 1950. 
B)  declined as depletion occurred. 
C)  greatly reduced the reserves available in 2000. 
D)  was limited to a fraction of the reserves available in 1950.

Question 10

When Cabbage Patch Dolls were introduced, they were extremely popular at Christmas, and most stores sold out. By the next year, there were plenty still available at Christmas. What happened?

Accepted Answer

We might conclude that the manufacturer

Question 11

Proved reserves of petroleum are

Accepted Answer

A)  the verified quantity of petroleum that can be recovered at current prices and levels of technology. 
B)  the only reserves likely to be available in the future. 
C)  refined products awaiting shipment to the market. 
D)  the total amount of the resource in existence, regardless of the productive effort undertaken to expand the future availability of the resource. 
A)  the verified quantity of petroleum that can be recovered at current prices and levels of technology. 
B)  the only reserves likely to be available in the future. 
C)  refined products awaiting shipment to the market. 
D)  the total amount of the resource in existence, regardless of the productive effort undertaken to expand the future availability of the resource.

Question 12

Which of the following is a necessary condition for price discrimination to be profitable?

Accepted Answer

A)  All consumers must have an identical demand for the product. 
B)  Groups of consumers with different demand elasticities must be easily distinguishable. 
C)  The market demand for the product must be highly elastic. 
D)  It must be possible for buyers to resell the product at a low cost. 
A)  All consumers must have an identical demand for the product. 
B)  Groups of consumers with different demand elasticities must be easily distinguishable. 
C)  The market demand for the product must be highly elastic. 
D)  It must be possible for buyers to resell the product at a low cost.

Question 13

A profit-maximizing price searcher will expand output to the point where

Accepted Answer

A)  total revenue equals total cost. 
B)  marginal revenue equals marginal cost. 
C)  price equals average total cost. 
D)  price equals marginal cost. 
A)  total revenue equals total cost. 
B)  marginal revenue equals marginal cost. 
C)  price equals average total cost. 
D)  price equals marginal cost.

Question 14

Airlines generally charge travelers willing to stay over Saturday night lower fares because

Accepted Answer

A)  these travelers have lower incomes, and therefore, the airlines would like to help them. 
B)  it cost less to transport travelers willing to stay over a Saturday night. 
C)  the demand of these travelers is elastic, and therefore, the lower fares generate more revenue. 
D)  the demand of these travelers is inelastic, and therefore, the lower fares generate more revenue for the airlines. 
A)  these travelers have lower incomes, and therefore, the airlines would like to help them. 
B)  it cost less to transport travelers willing to stay over a Saturday night. 
C)  the demand of these travelers is elastic, and therefore, the lower fares generate more revenue. 
D)  the demand of these travelers is inelastic, and therefore, the lower fares generate more revenue for the airlines.

Question 15

Use the figure to answer the following question(s).
Figure 10-2  
-What is the maximum economic profit this firm depicted in Figure 10-2 will be able to earn?

Accepted Answer

A)  zero 
B)  $20 
C)  $30 
D)  $100 
A)  zero 
B)  $20 
C)  $30 
D)  $100

Question 16

Resource markets are like any other market in that

Accepted Answer

A)  the increase in quantity supplied in response to a higher price will generally be greater in the long run than in the short run. 
B)  the amount demanded of a resource is inversely related to its price. 
C)  higher prices encourage people to search for substitutes. 
D)  all of the above are correct. 
A)  the increase in quantity supplied in response to a higher price will generally be greater in the long run than in the short run. 
B)  the amount demanded of a resource is inversely related to its price. 
C)  higher prices encourage people to search for substitutes. 
D)  all of the above are correct.

Question 17

Why do most economists believe we will not run out of oil?

Accepted Answer

A)  The government has wisely subsidized alternative forms of energy. 
B)  If oil was in short supply, its price would rise, causing consumers to conserve on its use and producers to discover more oil and alternative energy sources. 
C)  Government imposed regulations that force automobile manufacturers to produce cars that use less gasoline per mile. 
D)  This is a trick question. Most economists believe that the world will run out of oil in about 20 years. 
A)  The government has wisely subsidized alternative forms of energy. 
B)  If oil was in short supply, its price would rise, causing consumers to conserve on its use and producers to discover more oil and alternative energy sources. 
C)  Government imposed regulations that force automobile manufacturers to produce cars that use less gasoline per mile. 
D)  This is a trick question. Most economists believe that the world will run out of oil in about 20 years.

Question 18

Which of the following is true of entrepreneurship?

Accepted Answer

A)  Entrepreneurial discovery is an important source of economic growth and higher living standards. 
B)  The role of the entrepreneur is not very important and that is why it is generally not included in economic models. 
C)  The role of entrepreneurial discovery could be easily integrated into economic models, but nonetheless economists choose not to do so. 
D)  Economic models are able to capture fully the important role of the entrepreneur in the market process. 
A)  Entrepreneurial discovery is an important source of economic growth and higher living standards. 
B)  The role of the entrepreneur is not very important and that is why it is generally not included in economic models. 
C)  The role of entrepreneurial discovery could be easily integrated into economic models, but nonetheless economists choose not to do so. 
D)  Economic models are able to capture fully the important role of the entrepreneur in the market process.

Question 19

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 20

In competitive price-searcher markets, short-run economic losses will lead to

Accepted Answer

A)  long-run economic losses. 
B)  the exit of firms from the market and the eventual restoration of zero long-run economic profits. 
C)  the entry of new firms into the market as old firms fail. 
D)  the entry of additional firms into the market, causing each firm to experience an increase in demand for its product. 
A)  long-run economic losses. 
B)  the exit of firms from the market and the eventual restoration of zero long-run economic profits. 
C)  the entry of new firms into the market as old firms fail. 
D)  the entry of additional firms into the market, causing each firm to experience an increase in demand for its product.

Why do airlines often charge students and vacationers a lower price than business travelers?

Which of the following is a true statement?

The firms in a competitive price-searcher market produce goods and services that are

A practice whereby a seller charges different prices to different consumers of the same product or service is called

Economic theory indicates that the economy is better off not to produce proved reserves of a mineral "too quickly." By this, the theory means that

If a government wanted to increase the prosperity of a nation, it could best serve this goal by

Higher prices for natural resources are

The fact that barriers to entry are low in competitive price-searcher markets means that if current firms are making economic losses,

Data on world reserves of minerals, gathered by Blackman and Baumol, show that between 1950 and 2000, production of most minerals

When Cabbage Patch Dolls were introduced, they were extremely popular at Christmas, and most stores sold out. By the next year, there were plenty still available at Christmas. What happened?

Proved reserves of petroleum are

Which of the following is a necessary condition for price discrimination to be profitable?

A profit-maximizing price searcher will expand output to the point where

Airlines generally charge travelers willing to stay over Saturday night lower fares because

Use the figure to answer the following question(s). Figure 10-2 -What is the maximum economic profit this firm depicted in Figure 10-2 will be able to earn?

Resource markets are like any other market in that

Why do most economists believe we will not run out of oil?

Which of the following is true of entrepreneurship?

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

In competitive price-searcher markets, short-run economic losses will lead to

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

Why do airlines often charge students and vacationers a lower price than business travelers?

Which of the following is a true statement?

The firms in a competitive price-searcher market produce goods and services that are

A practice whereby a seller charges different prices to different consumers of the same product or service is called

Economic theory indicates that the economy is better off not to produce proved reserves of a mineral "too quickly." By this, the theory means that

If a government wanted to increase the prosperity of a nation, it could best serve this goal by

Higher prices for natural resources are

The fact that barriers to entry are low in competitive price-searcher markets means that if current firms are making economic losses,

Data on world reserves of minerals, gathered by Blackman and Baumol, show that between 1950 and 2000, production of most minerals

When Cabbage Patch Dolls were introduced, they were extremely popular at Christmas, and most stores sold out. By the next year, there were plenty still available at Christmas. What happened?

Proved reserves of petroleum are

Which of the following is a necessary condition for price discrimination to be profitable?

A profit-maximizing price searcher will expand output to the point where

Airlines generally charge travelers willing to stay over Saturday night lower fares because

Use the figure to answer the following question(s). Figure 10-2 -What is the maximum economic profit this firm depicted in Figure 10-2 will be able to earn?

Resource markets are like any other market in that

Why do most economists believe we will not run out of oil?

Which of the following is true of entrepreneurship?

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

In competitive price-searcher markets, short-run economic losses will lead to

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