Question 1

Figure 10-12

-Refer to Figure 10-12.Which of the panels depicts a firm in a competitive price-searcher market earning positive economic profits?

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 2

If a contestable market has only one seller,which of the following will keep the seller from producing inefficiently and charging a price that generates long-run economic profits?

Accepted Answer

A) government regulations 
B) low costs of entry into and exit from the market 
C) substantial economies of scale that provide a competitive advantage to large firms in such markets 
D) the threat of a government takeover of the firms in these markets 
A) government regulations 
B) low costs of entry into and exit from the market 
C) substantial economies of scale that provide a competitive advantage to large firms in such markets 
D) the threat of a government takeover of the firms in these markets

Question 3

A firm in a competitive price-searcher market can raise its price without losing all of its customers.This is a result of

Accepted Answer

A) low entry barriers. 
B) a perfectly elastic market demand. 
C) the small number of firms in the market. 
D) product differentiation. 
A) low entry barriers. 
B) a perfectly elastic market demand. 
C) the small number of firms in the market. 
D) product differentiation.

Question 4

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 5

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 6

If firms in a competitive price-searcher market are earning economic profits,which of the following scenarios would best describe the change existing firms would face as the market adjusts to long-run equilibrium?

Accepted Answer

A) An increase in demand for each firm and lower prices. 
B) A decrease in demand for each firm and lower prices. 
C) An increase in demand for each firm and higher prices. 
D) A decrease in demand for each firm and higher prices. 
A) An increase in demand for each firm and lower prices. 
B) A decrease in demand for each firm and lower prices. 
C) An increase in demand for each firm and higher prices. 
D) A decrease in demand for each firm and higher prices.

Question 7

Which of the following most closely approximates the conditions of a competitive price-searcher market?

Accepted Answer

A) the market for Grade A eggs,which is characterized by a large number of firms producing a homogeneous product 
B) the restaurant industry,which is characterized by firms producing a differentiated product in a market with low entry barriers 
C) local cable television service,where a licensed supplier competes with firms offering satellite service 
D) the market for jumbo aircraft,where one major domestic firm competes with one major foreign firm 
A) the market for Grade A eggs,which is characterized by a large number of firms producing a homogeneous product 
B) the restaurant industry,which is characterized by firms producing a differentiated product in a market with low entry barriers 
C) local cable television service,where a licensed supplier competes with firms offering satellite service 
D) the market for jumbo aircraft,where one major domestic firm competes with one major foreign firm

Question 8

For which of the following products would effective price discrimination (from the seller's viewpoint)be most likely?

Accepted Answer

A) medical care 
B) compact discs 
C) clothing 
D) groceries 
A) medical care 
B) compact discs 
C) clothing 
D) groceries

Question 9

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 10

If a movie theater is going to gain by charging students a dollar less than other customers,

Accepted Answer

A) the demand of students must be more elastic than that of other customers. 
B) the demand of students must be less elastic than that of other customers. 
C) students must have higher incomes than other customers. 
D) other customers must enjoy movies more than students. 
A) the demand of students must be more elastic than that of other customers. 
B) the demand of students must be less elastic than that of other customers. 
C) students must have higher incomes than other customers. 
D) other customers must enjoy movies more than students.

Question 11

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) be able to prevent consumers from reselling the product to other 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) be able to prevent consumers from reselling the product to other consumers.

Question 12

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 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

A major fruit juice manufacturer failed in its attempt to engage in price discrimination between students and all other consumers.What is the most likely explanation for this failure?

Accepted Answer

A) There was nothing to prevent the students from reselling the fruit juice to other consumers. 
B) The two groups of consumers have different demand elasticities for fruit juice. 
C) The cost of producing the product is relatively high. 
D) Market demand for fruit juice is inelastic. 
A) There was nothing to prevent the students from reselling the fruit juice to other consumers. 
B) The two groups of consumers have different demand elasticities for fruit juice. 
C) The cost of producing the product is relatively high. 
D) Market demand for fruit juice is inelastic.

Question 15

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 16

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.

Exam 23: Price-Searcher Markets With Low Entry Barriers

Figure 10-12 -Refer to Figure 10-12.Which of the panels depicts a firm in a competitive price-searcher market earning positive economic profits?

If a contestable market has only one seller,which of the following will keep the seller from producing inefficiently and charging a price that generates long-run economic profits?

A firm in a competitive price-searcher market can raise its price without losing all of its customers.This is a result of

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?

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

If firms in a competitive price-searcher market are earning economic profits,which of the following scenarios would best describe the change existing firms would face as the market adjusts to long-run equilibrium?

Which of the following most closely approximates the conditions of a competitive price-searcher market?

For which of the following products would effective price discrimination (from the seller's viewpoint)be most likely?

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

If a movie theater is going to gain by charging students a dollar less than other customers,

For effective price discrimination to occur,a seller must

Price discrimination refers to a system of pricing

The term price searcher applies to all firms that

A major fruit juice manufacturer failed in its attempt to engage in price discrimination between students and all other consumers.What is the most likely explanation for this failure?

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

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

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