Question 1

The strategy underlying price discrimination is to

Accepted Answer

A) charge higher prices to customers who have better access to substitutes. 
B) charge everyone the same price but limit the quantity they are allowed to buy. 
C) increase total revenue by charging higher prices to those with the most inelastic demand for the product and lower prices to those with the most elastic demand. 
D) reduce per-unit cost to the firm by charging higher prices to those with the most inelastic demand and lower prices to those with the most elastic demand. 
A) charge higher prices to customers who have better access to substitutes. 
B) charge everyone the same price but limit the quantity they are allowed to buy. 
C) increase total revenue by charging higher prices to those with the most inelastic demand for the product and lower prices to those with the most elastic demand. 
D) reduce per-unit cost to the firm by charging higher prices to those with the most inelastic demand and lower prices to those with the most elastic demand.

Question 2

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 3

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 4

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 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

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 7

Which of the following is not a characteristic of a competitive price-searcher market?

Accepted Answer

A) Each firm produces a differentiated product. 
B) The entry barriers are high. 
C) Each firm faces a downward-sloping demand curve. 
D) The number of firms in the market is large. 
A) Each firm produces a differentiated product. 
B) The entry barriers are high. 
C) Each firm faces a downward-sloping demand curve. 
D) The number of firms in the market is large.

Question 8

Niceville,Ohio,only has two dentists,while the surrounding communities have many more on a per capita basis.The demand for dental services is such that these two dentists could agree to raise their prices (they play golf together every Saturday)and earn economic profit.Instead,they choose to price competitively and earn what other dentists earn.What might explain this?

Accepted Answer

The dentists probably know that economic

Question 9

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

Accepted Answer

A) $0 
B) $2 
C) $7 
D) $42 
A) $0 
B) $2 
C) $7 
D) $42

Question 10

When profits exist in a competitive price-searcher market,

Accepted Answer

A) rival firms will be attracted into the market. 
B) high barriers to entry will prevent rival firms from entering the market. 
C) product differentiation will prevent new firms from making a profit. 
D) the profits will persist because the firms face a downward-sloping demand curve. 
A) rival firms will be attracted into the market. 
B) high barriers to entry will prevent rival firms from entering the market. 
C) product differentiation will prevent new firms from making a profit. 
D) the profits will persist because the firms face a downward-sloping demand curve.

Question 11

If the firms in a competitive price-searcher market are earning zero economic profit,this indicates that the

Accepted Answer

A) market is not in long-run equilibrium. 
B) firms are earning the normal rate of return. 
C) firms are performing worse than the firms in other markets. 
D) firms are performing better than firms in other markets. 
A) market is not in long-run equilibrium. 
B) firms are earning the normal rate of return. 
C) firms are performing worse than the firms in other markets. 
D) firms are performing better than firms in other markets.

Question 12

A contestable market is a market

Accepted Answer

A) that is highly contested by two,and only two,rival firms. 
B) in which the costs of entry and exit are low. 
C) characterized by high profitability and government regulation. 
D) characterized by a large number of firms;in essence,the term means the same thing as pure competition. 
A) that is highly contested by two,and only two,rival firms. 
B) in which the costs of entry and exit are low. 
C) characterized by high profitability and government regulation. 
D) characterized by a large number of firms;in essence,the term means the same thing as pure competition.

Question 13

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 14

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 15

When an entrepreneur introduces a new improved product that is highly valued relative to cost

Accepted Answer

A) consumers will be worse off. 
B) the demand for the products that are good substitutes for the new product will increase. 
C) some of the existing products will become obsolete and businesses producing those products will fail. 
D) total employment will decline if there are business failures. 
A) consumers will be worse off. 
B) the demand for the products that are good substitutes for the new product will increase. 
C) some of the existing products will become obsolete and businesses producing those products will fail. 
D) total employment will decline if there are business failures.

Question 16

Part of the entrepreneurial process in a competitive market economy involves

Accepted Answer

A) obtaining governmental control over the market so that a new product has some chance of being successful. 
B) knowing from the start the proper output and price to set for each new product. 
C) choosing the best structure,size,and scope of production for the firm to produce a new product. 
D) knowing in advance with certainty what products consumers will want to buy. 
A) obtaining governmental control over the market so that a new product has some chance of being successful. 
B) knowing from the start the proper output and price to set for each new product. 
C) choosing the best structure,size,and scope of production for the firm to produce a new product. 
D) knowing in advance with certainty what products consumers will want to buy.

Question 17

If Dell Computer finds that its marginal cost exceeds its marginal revenue on a model of laptop,then to maximize profit,it will

Accepted Answer

A) increase output if it is a price searcher,but this may not be proper if it is a price taker. 
B) increase output if it is a price taker,but this may not be proper if it is a price searcher. 
C) decrease output,regardless of whether it is a price taker or a price searcher. 
D) increase output,regardless of whether it is a price taker or a price searcher. 
A) increase output if it is a price searcher,but this may not be proper if it is a price taker. 
B) increase output if it is a price taker,but this may not be proper if it is a price searcher. 
C) decrease output,regardless of whether it is a price taker or a price searcher. 
D) increase output,regardless of whether it is a price taker or a price searcher.

Question 18

Evaluate the following statement: "Competitive price-searcher markets are inefficient relative to purely competitive markets since prices are higher and firms don't produce an output rate that minimizes average total cost.As a result,government action should be undertaken to remedy this situation."

Accepted Answer

Competitive price-searcher markets do ha

Question 19

Which of the following is the best example of a firm operating in a competitive price-searcher market?

Accepted Answer

A) a pizza parlor operating near a college campus 
B) Shell Oil Company,a major refiner of gasoline 
C) a Texas rancher that raises beef cattle 
D) Boeing,the aircraft manufacturer 
A) a pizza parlor operating near a college campus 
B) Shell Oil Company,a major refiner of gasoline 
C) a Texas rancher that raises beef cattle 
D) Boeing,the aircraft manufacturer

Question 20

Which of the following statements best describes the price,output,and profit conditions of competitive price-searcher markets?

Accepted Answer

A) Price will equal marginal cost at the profit-maximizing level of output;profits will be positive in the long-run. 
B) Price will always equal average variable cost in the short run and either profits or losses may result in the long run. 
C) Marginal revenue will equal marginal cost at the short run,profit-maximizing level of output;in the long run,economic profit will be zero. 
D) Marginal revenue will equal average total cost in the short run;long-run economic profits will be zero. 
A) Price will equal marginal cost at the profit-maximizing level of output;profits will be positive in the long-run. 
B) Price will always equal average variable cost in the short run and either profits or losses may result in the long run. 
C) Marginal revenue will equal marginal cost at the short run,profit-maximizing level of output;in the long run,economic profit will be zero. 
D) Marginal revenue will equal average total cost in the short run;long-run economic profits will be zero.

Exam 23: Price-Searcher Markets With Low Entry Barriers

The strategy underlying price discrimination is to

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

A contestable market is one in which

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

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

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

Which of the following is not a characteristic of a competitive price-searcher market?

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

When profits exist in a competitive price-searcher market,

If the firms in a competitive price-searcher market are earning zero economic profit,this indicates that the

A contestable market is a market

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?

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

When an entrepreneur introduces a new improved product that is highly valued relative to cost

Part of the entrepreneurial process in a competitive market economy involves

If Dell Computer finds that its marginal cost exceeds its marginal revenue on a model of laptop,then to maximize profit,it will

Evaluate the following statement: "Competitive price-searcher markets are inefficient relative to purely competitive markets since prices are higher and firms don't produce an output rate that minimizes average total cost.As a result,government action should be undertaken to remedy this situation."

Which of the following is the best example of a firm operating in a competitive price-searcher market?

Which of the following statements best describes the price,output,and profit conditions of competitive price-searcher markets?

The Economic Approach

Asome Tools of the Economist

Asupply,demand,and the Market Process

Asupply and Demand: Applications and Extensions

Difficult Cases for the Market and the Role of Government

The Economics of Collective Decision-Making

Ataking the Nations Economic Pulse

Economic Fluctuations, unemployment, and Inflation

Aan Introduction to Basic Macroeconomic Markets

Dynamic Change, economic Fluctuations, and the Ad-As Model

Fiscal Policy: the Keynesian View and Historical Perspective

Fiscal Policy, incentives, and Secondary Effects

Amoney and the Banking System

Modern Macroeconomics and Monetary Policy

Stabilization Policy, output, and Employment

Creating an Environment for Growth and Prosperity

Institutions,policies,and Cross-Country Differences in Income and Growth

Gaining From International Trade

International Finance and the Foreign Exchange Market

Consumer Choice and Elasticity

Acosts and the Supply of Goods

Aprice Takers and the Competitive Process

Aprice-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

Government Spending and Taxation

The Economics of Social Security

The Stock Market: Its Function, Performance, and Potential As an Investment Opportunity

Great Debates in Economics: Keynes Versus Hayek

The Crisis of 2008: Causes and Lessons for the Future

Lessons From the Great Depression

Lessons From Japan and Canada

The Federal Budget and the National Debt

The Economics of Healthcare

Education: Problems and Performance

Earnings Differences Between Men and Women

Do Labor Unions Increase the Wages of Workers

The Question of Resource Exhaustion

Difficult Environmental Cases and the Role of Government

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