Question 1

When a competitive price-searcher market is in long-run equilibrium, the firms will

Accepted Answer

A)  earn economic profit. 
B)  operate at an output level that minimizes long-run average total cost. 
C)  charge a price that is equal to average total cost. 
D)  operate at an output level where price is equal to marginal cost. 
A)  earn economic profit. 
B)  operate at an output level that minimizes long-run average total cost. 
C)  charge a price that is equal to average total cost. 
D)  operate at an output level where price is equal to marginal cost.

Question 2

If a price-searcher firm can sell nine units at a price of $20, or it can sell ten units at a price of $17, what is the marginal revenue of the tenth unit?

Accepted Answer

A)  − $10 
B)  $10 
C)  $17 
D)  $20 
A)  − $10 
B)  $10 
C)  $17 
D)  $20

Question 3

When a new firm enters a competitive price-searcher market, the demand curves faced by all existing firms in that market will

Accepted Answer

A)  shift to the left. 
B)  shift to the right. 
C)  shift in a direction that is unpredictable without further information. 
D)  remain unchanged. It is the supply curve that will shift. 
A)  shift to the left. 
B)  shift to the right. 
C)  shift in a direction that is unpredictable without further information. 
D)  remain unchanged. It is the supply curve that will shift.

Question 4

If firms in a competitive price-searcher market are currently experiencing economic profits, then over time,

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 5

A firm that uses price discrimination to enhance its net revenues will

Accepted Answer

A)  expand output as long as price exceeds average total costs. 
B)  expand output as long as average total costs are declining. 
C)  charge a higher price to consumers with a more elastic demand for the firm's product. 
D)  charge a lower price to consumers with a more elastic demand for the firm's product. 
A)  expand output as long as price exceeds average total costs. 
B)  expand output as long as average total costs are declining. 
C)  charge a higher price to consumers with a more elastic demand for the firm's product. 
D)  charge a lower price to consumers with a more elastic demand for the firm's product.

Question 6

The practice of price discrimination has which of the following effects?

Accepted Answer

A)  Groups with the higher elasticity of demand will pay higher prices. 
B)  Groups with the lower elasticity of demand will pay higher prices. 
C)  With price discrimination, total output and allocative efficiency will fall. 
D)  Groups will pay identical prices that are exactly equal to the firm's marginal cost. 
A)  Groups with the higher elasticity of demand will pay higher prices. 
B)  Groups with the lower elasticity of demand will pay higher prices. 
C)  With price discrimination, total output and allocative efficiency will fall. 
D)  Groups will pay identical prices that are exactly equal to the firm's marginal cost.

Question 7

A contestable market is one in which

Accepted Answer

A)  there is a competitive (normal) profit rate and few firms operating. 
B)  the costs of entry and exit are high. 
C)  each firm produces an identical product. 
D)  the fixed costs of firms in the market are also sunk costs. 
A)  there is a competitive (normal) profit rate and few firms operating. 
B)  the costs of entry and exit are high. 
C)  each firm produces an identical product. 
D)  the fixed costs of firms in the market are also sunk costs.

Question 8

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 9

As firms exit a competitive price-searcher market, profits of remaining firms

Accepted Answer

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

Question 10

Which of the following is a term that is sometimes used to describe markets with low entry barriers and firms that are price searchers?

Accepted Answer

A)  pure competition 
B)  monopoly 
C)  monopolistic competition 
D)  oligopoly 
A)  pure competition 
B)  monopoly 
C)  monopolistic competition 
D)  oligopoly

Question 11

Which of the following 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 12

Which of the following is a major difference between a competitive price searcher and a price taker?

Accepted Answer

A)  Price takers need to compete through advertising because they cannot choose their own price, whereas competitive price searchers compete primarily through their pricing policies. 
B)  Price takers are exposed to competition because of low barriers to entry, whereas competitive price searchers are somewhat immune from competition due to relatively high barriers to entry. 
C)  Price takers can never earn economic profits, whereas competitive price searchers can earn economic profits in the short run. 
D)  Price takers produce identical goods, whereas competitive price searchers produce goods that are differentiated from the goods produced by their competitors. 
A)  Price takers need to compete through advertising because they cannot choose their own price, whereas competitive price searchers compete primarily through their pricing policies. 
B)  Price takers are exposed to competition because of low barriers to entry, whereas competitive price searchers are somewhat immune from competition due to relatively high barriers to entry. 
C)  Price takers can never earn economic profits, whereas competitive price searchers can earn economic profits in the short run. 
D)  Price takers produce identical goods, whereas competitive price searchers produce goods that are differentiated from the goods produced by their competitors.

Question 13

Figure 10-12

Refer to Figure 10-12. Panel (a) shows a profit-maximizing competitive price-searcher firm that is

Accepted Answer

A)  earning zero economic profit. 
B)  likely to exit the market in the long run. 
C)  producing its efficient scale of output. 
D)  not maximizing its profit. 
A)  earning zero economic profit. 
B)  likely to exit the market in the long run. 
C)  producing its efficient scale of output. 
D)  not maximizing its profit.

Question 14

Price discrimination refers to a system of pricing

Accepted Answer

A)  based on buyer income rather than buyer demand conditions, so the poor pay more than the rich. 
B)  that is always more profitable than simple "single-price" pricing. 
C)  that forces customers who require more service to pay higher prices. 
D)  where consumer groups with a more elastic demand for the product are charged lower prices. 
A)  based on buyer income rather than buyer demand conditions, so the poor pay more than the rich. 
B)  that is always more profitable than simple "single-price" pricing. 
C)  that forces customers who require more service to pay higher prices. 
D)  where consumer groups with a more elastic demand for the product are charged lower prices.

Question 15

When a competitive price-searcher market is in long-run equilibrium, the firms in the market will earn

Accepted Answer

A)  substantial economic profits. 
B)  zero economic profits. 
C)  significant economic losses. 
D)  an above-normal accounting rate of return. 
A)  substantial economic profits. 
B)  zero economic profits. 
C)  significant economic losses. 
D)  an above-normal accounting rate of return.

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 10-14
 
Refer to Figure 10-14. This firm will maximize profits by producing a quantity of output equal to

Accepted Answer

A)  I and charging a price equal to A . 
B)  I and charging a price equal to C . 
C)  I and charging a price equal to D . 
D)  J and charging a price equal to B . 
A)  I and charging a price equal to A . 
B)  I and charging a price equal to C . 
C)  I and charging a price equal to D . 
D)  J and charging a price equal to B .

Question 17

Suppose a price-searcher firm faces the following demand curve data for its product.
  What is the firm's marginal revenue from selling the sixth unit?

Accepted Answer

A)  $4 
B)  $9 
C)  $10 
D)  $54 
A)  $4 
B)  $9 
C)  $10 
D)  $54

Question 18

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 19

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 20

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.

When a competitive price-searcher market is in long-run equilibrium, the firms will

If a price-searcher firm can sell nine units at a price of $20, or it can sell ten units at a price of $17, what is the marginal revenue of the tenth unit?

When a new firm enters a competitive price-searcher market, the demand curves faced by all existing firms in that market will

If firms in a competitive price-searcher market are currently experiencing economic profits, then over time,

A firm that uses price discrimination to enhance its net revenues will

The practice of price discrimination has which of the following effects?

A contestable market is one in which

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?

As firms exit a competitive price-searcher market, profits of remaining firms

Which of the following is a term that is sometimes used to describe markets with low entry barriers and firms that are price searchers?

Which of the following is true?

Which of the following is a major difference between a competitive price searcher and a price taker?

Figure 10-12 Refer to Figure 10-12. Panel (a) shows a profit-maximizing competitive price-searcher firm that is

Price discrimination refers to a system of pricing

When a competitive price-searcher market is in long-run equilibrium, the firms in the market will earn

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 10-14 Refer to Figure 10-14. This firm will maximize profits by producing a quantity of output equal to

Suppose a price-searcher firm faces the following demand curve data for its product. What is the firm's marginal revenue from selling the sixth unit?

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?

Firms that engage in price discrimination

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

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

When a competitive price-searcher market is in long-run equilibrium, the firms will

If a price-searcher firm can sell nine units at a price of $20, or it can sell ten units at a price of $17, what is the marginal revenue of the tenth unit?

When a new firm enters a competitive price-searcher market, the demand curves faced by all existing firms in that market will

If firms in a competitive price-searcher market are currently experiencing economic profits, then over time,

A firm that uses price discrimination to enhance its net revenues will

The practice of price discrimination has which of the following effects?

A contestable market is one in which

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?

As firms exit a competitive price-searcher market, profits of remaining firms

Which of the following is a term that is sometimes used to describe markets with low entry barriers and firms that are price searchers?

Which of the following is true?

Which of the following is a major difference between a competitive price searcher and a price taker?

Figure 10-12 Refer to Figure 10-12. Panel (a) shows a profit-maximizing competitive price-searcher firm that is

Price discrimination refers to a system of pricing

When a competitive price-searcher market is in long-run equilibrium, the firms in the market will earn

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 10-14 Refer to Figure 10-14. This firm will maximize profits by producing a quantity of output equal to

Suppose a price-searcher firm faces the following demand curve data for its product. What is the firm's marginal revenue from selling the sixth unit?

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?

Firms that engage in price discrimination

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

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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