Question 1

Given the following schedule, what price and output level would a profit-maximizing price searcher choose?

Accepted Answer

A)  price, $45; output, 2 units 
B)  price, $35; output, 3 units 
C)  price, $30; output, 4 units 
D)  price, $25; output, 5 units 
A)  price, $45; output, 2 units 
B)  price, $35; output, 3 units 
C)  price, $30; output, 4 units 
D)  price, $25; output, 5 units

Question 2

In order to be successful in a competitive market economy, an entrepreneur must

Accepted Answer

A)  provide buyers at least as much satisfaction per dollar spent as the buyer could get elsewhere. 
B)  supply consumers with goods and services valued less highly than the resources necessary to produce them. 
C)  take resources from other producers, thus reallocating wealth but not creating new wealth. 
D)  gain government grants and subsidies. 
A)  provide buyers at least as much satisfaction per dollar spent as the buyer could get elsewhere. 
B)  supply consumers with goods and services valued less highly than the resources necessary to produce them. 
C)  take resources from other producers, thus reallocating wealth but not creating new wealth. 
D)  gain government grants and subsidies.

Question 3

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 4

Which of the following is true?

Accepted Answer

A)  Price takers will not be able to earn economic profits in the long run, but competitive price searchers will be able to do so. 
B)  Competitive price searchers will not be able to earn economic profits in the long run, but price takers will be able to do so. 
C)  Neither competitive price searchers nor price takers will be able to earn economic profits in the long run. 
D)  Both competitive price takers and price searchers will be able to earn economic profits in the long run. 
A)  Price takers will not be able to earn economic profits in the long run, but competitive price searchers will be able to do so. 
B)  Competitive price searchers will not be able to earn economic profits in the long run, but price takers will be able to do so. 
C)  Neither competitive price searchers nor price takers will be able to earn economic profits in the long run. 
D)  Both competitive price takers and price searchers will be able to earn economic profits in the long run.

Question 5

The table below presents the expected cost and demand schedules confronting Handy John, a chair manufacturer. Given this information, what will be the profit (or loss) of Handy John at the profit-maximizing price?

Accepted Answer

A)  $200 loss 
B)  $200 profit 
C)  $150 profit 
D)  $500 profit 
A)  $200 loss 
B)  $200 profit 
C)  $150 profit 
D)  $500 profit

Question 6

Which of the following is true for firms that produce in markets where there are no barriers to entry?

Accepted Answer

A)  The firms will always make positive economic profits in the long run. 
B)  The firms will always make positive economic profits in the short run. 
C)  The firms will always make zero economic profits in the short run. 
D)  The firms will always make zero economic profits in the long run. 
A)  The firms will always make positive economic profits in the long run. 
B)  The firms will always make positive economic profits in the short run. 
C)  The firms will always make zero economic profits in the short run. 
D)  The firms will always make zero economic profits in the long run.

Question 7

If economic profits were present in a competitive price-searcher industry,

Accepted Answer

A)  production inefficiency would develop, causing costs to increase until the profits had been eliminated. 
B)  firms would operate in the short run, but they would be forced out of business in the long run as competition eliminated the economic profit. 
C)  competition from new entrants would occur until the economic profits had been eliminated. 
D)  the firms would eventually find these profits offset by long-run economic losses. 
A)  production inefficiency would develop, causing costs to increase until the profits had been eliminated. 
B)  firms would operate in the short run, but they would be forced out of business in the long run as competition eliminated the economic profit. 
C)  competition from new entrants would occur until the economic profits had been eliminated. 
D)  the firms would eventually find these profits offset by long-run economic losses.

Question 8

Relative to a situation where only a single price is charged, a seller that engages in price discrimination will

Accepted Answer

A)  charge consumers with an inelastic demand a lower price. 
B)  charge consumers with an elastic demand a higher price. 
C)  generally produce a larger total output. 
D)  decrease social welfare and make all consumers worse off. 
A)  charge consumers with an inelastic demand a lower price. 
B)  charge consumers with an elastic demand a higher price. 
C)  generally produce a larger total output. 
D)  decrease social welfare and make all consumers worse off.

Question 9

Sellers in competitive price-searcher markets

Accepted Answer

A)  face competition both from existing firms and potential new entrants. 
B)  face competition from existing firms but not from potential new entrants. 
C)  face competition only from potential new entrants and only in the long run. 
D)  can compete only by product quality since product prices are set by market forces. 
A)  face competition both from existing firms and potential new entrants. 
B)  face competition from existing firms but not from potential new entrants. 
C)  face competition only from potential new entrants and only in the long run. 
D)  can compete only by product quality since product prices are set by market forces.

Question 10

Which of the following businesses is most likely to be able to increase its total revenues by employing price discrimination?

Accepted Answer

A)  an automobile dealership 
B)  a retail furniture store 
C)  a grocery store chain like Publix or Kroger 
D)  a college or university 
A)  an automobile dealership 
B)  a retail furniture store 
C)  a grocery store chain like Publix or Kroger 
D)  a college or university

Question 11

What type of industry is the market for grocery products? Is over-capacity present?

Accepted Answer

Though there are numerous large chains,

Question 12

If a market is contestable, the market will be characterized by

Accepted Answer

A)  minimum-cost production methods and a competitive (normal) profit rate. 
B)  high barriers to entry and a small number of suppliers. 
C)  prices in excess of production costs and mergers leading to monopoly. 
D)  a large number of suppliers offering a homogeneous product. 
A)  minimum-cost production methods and a competitive (normal) profit rate. 
B)  high barriers to entry and a small number of suppliers. 
C)  prices in excess of production costs and mergers leading to monopoly. 
D)  a large number of suppliers offering a homogeneous product.

Question 13

Suppose that competitive price-searcher firms are earning positive profits. 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 existing firm experiences a rightward shift of its marginal revenue curve. 
D)  each existing firm experiences an upward shift in its average total cost curve. 
A)  the number of firms in the market decreases. 
B)  each existing firm experiences a decrease in demand for its product. 
C)  each existing firm experiences a rightward shift of its marginal revenue curve. 
D)  each existing firm experiences an upward shift in its average total cost curve.

Question 14

If firms in a competitive price-searcher market are currently earning economic losses, then in the long run,

Accepted Answer

A)  new firms will enter the market, and the current firms will experience a decrease in demand for their products until zero economic profit is again restored. 
B)  new firms will enter the market, and the current firms will experience an increase in demand for their products until zero economic profit is again restored. 
C)  some existing firms will exit the market, and the remaining firms will experience an increase in demand for their products until zero economic profit is again restored. 
D)  some existing firms will exit the market, and the remaining firms will experience a decrease in demand for their products until zero economic profit is again restored. 
A)  new firms will enter the market, and the current firms will experience a decrease in demand for their products until zero economic profit is again restored. 
B)  new firms will enter the market, and the current firms will experience an increase in demand for their products until zero economic profit is again restored. 
C)  some existing firms will exit the market, and the remaining firms will experience an increase in demand for their products until zero economic profit is again restored. 
D)  some existing firms will exit the market, and the remaining firms will experience a decrease in demand for their products until zero economic profit is again restored.

Question 15

An important variable that is left out of economic models is

Accepted Answer

A)  implicit costs. 
B)  excess profits. 
C)  entrepreneurship. 
D)  the opportunity cost of resources. 
A)  implicit costs. 
B)  excess profits. 
C)  entrepreneurship. 
D)  the opportunity cost of resources.

Question 16

The following question(s) refer(s) to the figure below, which depicts the demand, marginal revenue, and cost curves facing a firm in a competitive price-searcher industry.
Figure 10-13
 
Refer to Figure 10-13. The firm is currently earning an economic

Accepted Answer

A)  profit equal to the area CKGA . 
B)  profit equal to the area DJGA . 
C)  loss equal to the area CKGA . 
D)  loss equal to the area DJGA . 
A)  profit equal to the area CKGA . 
B)  profit equal to the area DJGA . 
C)  loss equal to the area CKGA . 
D)  loss equal to the area DJGA .

Question 17

Which of the following is true for a price-searcher firm?

Accepted Answer

A)  Its marginal revenue curve will lie below its demand curve. 
B)  Its marginal revenue curve will lie above its demand curve. 
C)  Its marginal revenue curve is equal to its demand curve. 
D)  Its marginal revenue curve is horizontal at the market equilibrium price. 
A)  Its marginal revenue curve will lie below its demand curve. 
B)  Its marginal revenue curve will lie above its demand curve. 
C)  Its marginal revenue curve is equal to its demand curve. 
D)  Its marginal revenue curve is horizontal at the market equilibrium price.

Question 18

As new firms enter a competitive price-searcher market, profits of existing firms

Accepted Answer

A)  rise and product diversity in the market increases. 
B)  rise and product diversity in the market decreases. 
C)  decline and product diversity in the market increases. 
D)  decline and product diversity in the market decreases. 
A)  rise and product diversity in the market increases. 
B)  rise and product diversity in the market decreases. 
C)  decline and product diversity in the market increases. 
D)  decline and product diversity in the market decreases.

Question 19

Airfares are generally cheaper if they include a Saturday night stay at the destination. This is because

Accepted Answer

A)  hotels give the airlines kickbacks to price this way. 
B)  business travelers are less likely than leisure travelers to be willing to stay Saturday night away from home, and business travelers will generally have more inelastic demand for air travel. 
C)  business travelers are less likely than leisure travelers to be willing to stay Saturday night away from home, and business travelers will generally have more elastic demand for air travel. 
D)  this reduces the demand for travel on Saturdays, which is a high-cost day to fly airplanes. 
A)  hotels give the airlines kickbacks to price this way. 
B)  business travelers are less likely than leisure travelers to be willing to stay Saturday night away from home, and business travelers will generally have more inelastic demand for air travel. 
C)  business travelers are less likely than leisure travelers to be willing to stay Saturday night away from home, and business travelers will generally have more elastic demand for air travel. 
D)  this reduces the demand for travel on Saturdays, which is a high-cost day to fly airplanes.

Question 20

In both price-taker and competitive price-searcher markets, when an increase in market demand disrupts a long-run equilibrium, it will lead to

Accepted Answer

A)  higher short-run prices and long-run profits. 
B)  higher short-run prices, short-run profits, and the entry of additional firms into the market. 
C)  higher short-run prices and the exit of firms from the market due to economies of scale. 
D)  no change in prices in the short run, but new firms will enter in the long run. 
A)  higher short-run prices and long-run profits. 
B)  higher short-run prices, short-run profits, and the entry of additional firms into the market. 
C)  higher short-run prices and the exit of firms from the market due to economies of scale. 
D)  no change in prices in the short run, but new firms will enter in the long run.

Given the following schedule, what price and output level would a profit-maximizing price searcher choose?

In order to be successful in a competitive market economy, an entrepreneur must

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?

Which of the following is true?

The table below presents the expected cost and demand schedules confronting Handy John, a chair manufacturer. Given this information, what will be the profit (or loss) of Handy John at the profit-maximizing price?

Which of the following is true for firms that produce in markets where there are no barriers to entry?

If economic profits were present in a competitive price-searcher industry,

Relative to a situation where only a single price is charged, a seller that engages in price discrimination will

Sellers in competitive price-searcher markets

Which of the following businesses is most likely to be able to increase its total revenues by employing price discrimination?

What type of industry is the market for grocery products? Is over-capacity present?

If a market is contestable, the market will be characterized by

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

If firms in a competitive price-searcher market are currently earning economic losses, then in the long run,

An important variable that is left out of economic models is

The following question(s) refer(s) to the figure below, which depicts the demand, marginal revenue, and cost curves facing a firm in a competitive price-searcher industry. Figure 10-13 Refer to Figure 10-13. The firm is currently earning an economic

Which of the following is true for a price-searcher firm?

As new firms enter a competitive price-searcher market, profits of existing firms

Airfares are generally cheaper if they include a Saturday night stay at the destination. This is because

In both price-taker and competitive price-searcher markets, when an increase in market demand disrupts a long-run equilibrium, it 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

Applying the Basics: Special Topics in Economics

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Exam 10: Price-Searcher Markets With Low Entry Barriers

Given the following schedule, what price and output level would a profit-maximizing price searcher choose?

In order to be successful in a competitive market economy, an entrepreneur must

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?

Which of the following is true?

The table below presents the expected cost and demand schedules confronting Handy John, a chair manufacturer. Given this information, what will be the profit (or loss) of Handy John at the profit-maximizing price?

Which of the following is true for firms that produce in markets where there are no barriers to entry?

If economic profits were present in a competitive price-searcher industry,

Relative to a situation where only a single price is charged, a seller that engages in price discrimination will

Sellers in competitive price-searcher markets

Which of the following businesses is most likely to be able to increase its total revenues by employing price discrimination?

What type of industry is the market for grocery products? Is over-capacity present?

If a market is contestable, the market will be characterized by

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

If firms in a competitive price-searcher market are currently earning economic losses, then in the long run,

An important variable that is left out of economic models is

The following question(s) refer(s) to the figure below, which depicts the demand, marginal revenue, and cost curves facing a firm in a competitive price-searcher industry. Figure 10-13 Refer to Figure 10-13. The firm is currently earning an economic

Which of the following is true for a price-searcher firm?

As new firms enter a competitive price-searcher market, profits of existing firms

Airfares are generally cheaper if they include a Saturday night stay at the destination. This is because

In both price-taker and competitive price-searcher markets, when an increase in market demand disrupts a long-run equilibrium, it 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

Applying the Basics: Special Topics in Economics

Filters