Question 1

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 2

In a competitive price-searcher market, the marginal revenue of the firm will always be

Accepted Answer

A)  a horizontal line. 
B)  greater than price. 
C)  less than price. 
D)  equal to price. 
A)  a horizontal line. 
B)  greater than price. 
C)  less than price. 
D)  equal to price.

Question 3

Even when there are only a few firms in a market, the market can still be competitive as long as barriers to entry are low. Markets of this type are called

Accepted Answer

A)  monopolistic markets. 
B)  price-taker markets. 
C)  contestable markets. 
D)  convertible markets. 
A)  monopolistic markets. 
B)  price-taker markets. 
C)  contestable markets. 
D)  convertible markets.

Question 4

Which of the following is characteristic of a firm that is a competitive price searcher?

Accepted Answer

A)  The firm faces an upward-sloping demand curve. 
B)  The firm faces an inelastic demand curve. 
C)  The firm faces a horizontal demand curve. 
D)  The firm produces a differentiated product. 
A)  The firm faces an upward-sloping demand curve. 
B)  The firm faces an inelastic demand curve. 
C)  The firm faces a horizontal demand curve. 
D)  The firm produces a differentiated product.

Question 5

Which of the following is the best example of "creative destruction"?

Accepted Answer

A)  The imprudent use of a credit card by a family that already has a high level of debt. 
B)  The virtual elimination of the film camera by the digital camera. 
C)  The failure of a business because of poor management. 
D)  The failure of a business because of higher cost resulting from government regulation. 
A)  The imprudent use of a credit card by a family that already has a high level of debt. 
B)  The virtual elimination of the film camera by the digital camera. 
C)  The failure of a business because of poor management. 
D)  The failure of a business because of higher cost resulting from government regulation.

Question 6

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 7

In order for effective price discrimination to occur, a seller must

Accepted Answer

A)  be a pure monopolist. 
B)  have large economies of scale and control over a key natural resource. 
C)  face a horizontal demand curve for its product. 
D)  have at least two distinguishable groups of consumers. 
A)  be a pure monopolist. 
B)  have large economies of scale and control over a key natural resource. 
C)  face a horizontal demand curve for its product. 
D)  have at least two distinguishable groups of consumers.

Question 8

Which of the following is true when long-run equilibrium conditions are present in price-taker and competitive price-searcher markets?

Accepted Answer

A)  MR = MC in both price-taker and competitive price-searcher markets 
B)  P = ATC in both price-taker and competitive price-searcher markets 
C)  P = MC in both price-taker and competitive price-searcher markets 
D)  Both a and b, but not c are true. 
A)  MR = MC in both price-taker and competitive price-searcher markets 
B)  P = ATC in both price-taker and competitive price-searcher markets 
C)  P = MC in both price-taker and competitive price-searcher markets 
D)  Both a and b, but not c are true.

Question 9

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 10

Use the figure to answer the following question(s).
Figure 10-5
 
Given that the short-run cost and demand conditions shown in Figure 10-5 for the competitive price-searcher firm are representative for all firms in the industry, what will happen in this industry in the long run?

Accepted Answer

A)  The firm will make long-run economic profits. 
B)  The firm will face competition from new entrants into the industry, causing this firm's demand to decline until zero economic profits are restored. 
C)  The firm will face competition from new entrants into the industry, but since lower prices will increase total sales, profit will stay the same as that shown in the figure. 
D)  The firm will see some of its competitors exit from the industry, causing this firm's demand to increase until zero economic profits are restored. 
A)  The firm will make long-run economic profits. 
B)  The firm will face competition from new entrants into the industry, causing this firm's demand to decline until zero economic profits are restored. 
C)  The firm will face competition from new entrants into the industry, but since lower prices will increase total sales, profit will stay the same as that shown in the figure. 
D)  The firm will see some of its competitors exit from the industry, causing this firm's demand to increase until zero economic profits are restored.

Question 11

Which of the following is true of a competitive price-searcher firm when the market is in a long-run equilibrium?

Accepted Answer

A)  MR< MC < price 
B)  MR< MC  = price 
C)  MR = MC < price 
D)  MR = MC = price 
A)  MR< MC < price 
B)  MR< MC  = price 
C)  MR = MC < price 
D)  MR = MC = price

Question 12

In a market that is contestable, but has only a few sellers, the

Accepted Answer

A)  threat of new entrants will prevent prices from rising above the competitive level. 
B)  producers will be able to charge prices that are high enough to produce long-run economic profits. 
C)  producers will not face new competition because the barriers to entry are high. 
D)  market will never be expected to come close to the competitive result. 
A)  threat of new entrants will prevent prices from rising above the competitive level. 
B)  producers will be able to charge prices that are high enough to produce long-run economic profits. 
C)  producers will not face new competition because the barriers to entry are high. 
D)  market will never be expected to come close to the competitive result.

Question 13

The term price searcher applies to all firms that

Accepted Answer

A)  face a downward-sloping demand curve. 
B)  face an upward-sloping demand curve. 
C)  operate in a purely competitive environment. 
D)  purchase resources in a noncompetitive market. 
A)  face a downward-sloping demand curve. 
B)  face an upward-sloping demand curve. 
C)  operate in a purely competitive environment. 
D)  purchase resources in a noncompetitive market.

Question 14

The traditional view of competitive price-searcher markets holds that this type of market structure is inefficient because

Accepted Answer

A)  there are too few firms to reach an efficient level of competition. 
B)  barriers to entry are high. 
C)  excessive advertising is encouraged. 
D)  consumers are not allowed a sufficient amount of choice in which to express their individual preferences. 
A)  there are too few firms to reach an efficient level of competition. 
B)  barriers to entry are high. 
C)  excessive advertising is encouraged. 
D)  consumers are not allowed a sufficient amount of choice in which to express their individual preferences.

Question 15

A competitive price-searcher market is best described as

Accepted Answer

A)  many firms with some control over price, and some product differentiation. 
B)  many firms with no control over price, producing identical products. 
C)  a few firms with some control over price, producing highly differentiated products. 
D)  a few firms with no control over price, producing similar products. 
E)  a single firm producing all of the output for the industry, with strong control over price. 
A)  many firms with some control over price, and some product differentiation. 
B)  many firms with no control over price, producing identical products. 
C)  a few firms with some control over price, producing highly differentiated products. 
D)  a few firms with no control over price, producing similar products. 
E)  a single firm producing all of the output for the industry, with strong control over price.

Question 16

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 17

Because barriers to entry are low in competitive price-searcher markets, in the long run, a firm's price will be equal to

Accepted Answer

A)  marginal revenue. 
B)  average total cost. 
C)  average variable cost. 
D)  average fixed cost. 
A)  marginal revenue. 
B)  average total cost. 
C)  average variable cost. 
D)  average fixed cost.

Question 18

Use the figure to answer the following question(s).
Figure 10-3
 
If the cost and demand conditions of this competitive price-searcher firm depicted in Figure 10-3 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 the market price 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 the market price will decline. 
D)  The firms in this industry probably will collude in order to increase their profitability.

Question 19

In both price-taker and competitive price-searcher markets, the long-run market price of a good will be equal to the

Accepted Answer

A)  average total cost of producing the good. 
B)  average variable cost of producing the good. 
C)  average fixed cost of producing the good plus a normal return on that cost. 
D)  marginal revenue derived from the sale of an additional unit of the good. 
A)  average total cost of producing the good. 
B)  average variable cost of producing the good. 
C)  average fixed cost of producing the good plus a normal return on that cost. 
D)  marginal revenue derived from the sale of an additional unit of the good.

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.

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

In a competitive price-searcher market, the marginal revenue of the firm will always be

Even when there are only a few firms in a market, the market can still be competitive as long as barriers to entry are low. Markets of this type are called

Which of the following is characteristic of a firm that is a competitive price searcher?

Which of the following is the best example of "creative destruction"?

Which of the following is true of entrepreneurship?

In order for effective price discrimination to occur, a seller must

Which of the following is true when long-run equilibrium conditions are present in price-taker and competitive price-searcher markets?

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

Use the figure to answer the following question(s). Figure 10-5 Given that the short-run cost and demand conditions shown in Figure 10-5 for the competitive price-searcher firm are representative for all firms in the industry, what will happen in this industry in the long run?

Which of the following is true of a competitive price-searcher firm when the market is in a long-run equilibrium?

In a market that is contestable, but has only a few sellers, the

The term price searcher applies to all firms that

The traditional view of competitive price-searcher markets holds that this type of market structure is inefficient because

A competitive price-searcher market is best described as

Which of the following is a true statement?

Because barriers to entry are low in competitive price-searcher markets, in the long run, a firm's price will be equal to

Use the figure to answer the following question(s). Figure 10-3 If the cost and demand conditions of this competitive price-searcher firm depicted in Figure 10-3 are representative of the market, what will happen in the future?

In both price-taker and competitive price-searcher markets, the long-run market price of a good will be equal to the

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

Applying the Basics: Special Topics in Economics

Filters

Exam 10: Price-Searcher Markets With Low Entry Barriers

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

In a competitive price-searcher market, the marginal revenue of the firm will always be

Even when there are only a few firms in a market, the market can still be competitive as long as barriers to entry are low. Markets of this type are called

Which of the following is characteristic of a firm that is a competitive price searcher?

Which of the following is the best example of "creative destruction"?

Which of the following is true of entrepreneurship?

In order for effective price discrimination to occur, a seller must

Which of the following is true when long-run equilibrium conditions are present in price-taker and competitive price-searcher markets?

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

Use the figure to answer the following question(s). Figure 10-5 Given that the short-run cost and demand conditions shown in Figure 10-5 for the competitive price-searcher firm are representative for all firms in the industry, what will happen in this industry in the long run?

Which of the following is true of a competitive price-searcher firm when the market is in a long-run equilibrium?

In a market that is contestable, but has only a few sellers, the

The term price searcher applies to all firms that

The traditional view of competitive price-searcher markets holds that this type of market structure is inefficient because

A competitive price-searcher market is best described as

Which of the following is a true statement?

Because barriers to entry are low in competitive price-searcher markets, in the long run, a firm's price will be equal to

Use the figure to answer the following question(s). Figure 10-3 If the cost and demand conditions of this competitive price-searcher firm depicted in Figure 10-3 are representative of the market, what will happen in the future?

In both price-taker and competitive price-searcher markets, the long-run market price of a good will be equal to the

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

Applying the Basics: Special Topics in Economics

Filters