Question 1

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 2

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 3

Figure 10-6
  
-Given that the short-run cost and demand conditions shown in Figure 10-6 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 see some of its competitors exit from the industry,causing this firm's demand to increase until zero economic profits are restored. 
D) This industry is in long-run equilibrium and will not experience any new entry or exit of firms. 
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 see some of its competitors exit from the industry,causing this firm's demand to increase until zero economic profits are restored. 
D) This industry is in long-run equilibrium and will not experience any new entry or exit of firms.

Question 4

Which of the following variables is left out of the simple economic model of the firm?

Accepted Answer

A) the marginal cost of production 
B) consumer tastes and preferences 
C) the fact that many firms actually earn profits 
D) the entrepreneurial decision-making process 
A) the marginal cost of production 
B) consumer tastes and preferences 
C) the fact that many firms actually earn profits 
D) the entrepreneurial decision-making process

Question 5

Figure 10-14
  
-Refer to Figure 10-14.The firm is currently earning an economic

Accepted Answer

A) profit equal to the area AHFC. 
B) profit equal to the area CFED. 
C) loss equal to the area AHED. 
D) loss equal to the area CFED. 
A) profit equal to the area AHFC. 
B) profit equal to the area CFED. 
C) loss equal to the area AHED. 
D) loss equal to the area CFED.

Question 6

In the real world,when there is no decision rule that can be applied using only information that is freely available,which of the following is most needed?

Accepted Answer

A) government direction 
B) entrepreneurial judgment 
C) protection from competition 
D) team production 
A) government direction 
B) entrepreneurial judgment 
C) protection from competition 
D) team production

Question 7

In the short run,Fed Ex,a price searcher wishing to maximize profits or minimize losses,should produce the output that

Accepted Answer

A) equates marginal cost with marginal revenue. 
B) equates marginal cost with price. 
C) corresponds to the lowest point on the average variable cost curve. 
D) corresponds to the lowest point on the average total cost curve. 
A) equates marginal cost with marginal revenue. 
B) equates marginal cost with price. 
C) corresponds to the lowest point on the average variable cost curve. 
D) corresponds to the lowest point on the average total cost curve.

Question 8

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 9

Which of the following characteristics is true for a competitive price searcher but not for a price taker?

Accepted Answer

A) The firm earns zero profits in the long run. 
B) The firm has an incentive to operate efficiently. 
C) A reduction in market demand will lead to short-run losses. 
D) Price is above marginal cost in long-run equilibrium. 
A) The firm earns zero profits in the long run. 
B) The firm has an incentive to operate efficiently. 
C) A reduction in market demand will lead to short-run losses. 
D) Price is above marginal cost in long-run equilibrium.

Question 10

A price-discriminating firm charges the lowest price to the group that

Accepted Answer

A) has the most elastic demand. 
B) purchases the largest quantity. 
C) engages in the most arbitrage. 
D) is least responsive to price changes. 
A) has the most elastic demand. 
B) purchases the largest quantity. 
C) engages in the most arbitrage. 
D) is least responsive to price changes.

Question 11

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.

Question 12

Which of the following is a characteristic of a contestable market?

Accepted Answer

A) long-run economic profit 
B) many firms that are small relative to the market 
C) high costs for entry and exit 
D) minimum-cost production methods 
A) long-run economic profit 
B) many firms that are small relative to the market 
C) high costs for entry and exit 
D) minimum-cost production methods

Question 13

In a competitive price-searcher market,the firms will

Accepted Answer

A) be able to choose their price,and the entry barriers into the market will be low. 
B) be able to choose their price,and the entry barriers into the market will be high. 
C) have to accept the market price for their product,and the entry barriers into the market will be low. 
D) have to accept the market price for their product,and the entry barriers into the market will be high. 
A) be able to choose their price,and the entry barriers into the market will be low. 
B) be able to choose their price,and the entry barriers into the market will be high. 
C) have to accept the market price for their product,and the entry barriers into the market will be low. 
D) have to accept the market price for their product,and the entry barriers into the market will be high.

Question 14

Figure 10-5
  
-Given the cost and demand conditions depicted in Figure 10-5 for the competitive price-searcher firm,what is the price that the firm should charge if it wants to maximize its profit?

Accepted Answer

A) 20 
B) 30 
C) 40 
D) 50 
A) 20 
B) 30 
C) 40 
D) 50

Question 15

Which of the following is not a necessary condition for effective price discrimination?

Accepted Answer

A) The firm must face a downward-sloping demand curve. 
B) There must be at least two distinguishable groups of consumers. 
C) The producer must be a pure monopolist. 
D) The seller must be able to prohibit buyers from easily reselling the product to other potential buyers. 
A) The firm must face a downward-sloping demand curve. 
B) There must be at least two distinguishable groups of consumers. 
C) The producer must be a pure monopolist. 
D) The seller must be able to prohibit buyers from easily reselling the product to other potential buyers.

Question 16

A competitive price-searcher firm is currently producing 10 units of output.At this level of output the firm is charging a price equal to $10,has marginal revenue equal to $6,has marginal cost equal to $6,and has average total cost equal to $12.From this information we can conclude that

Accepted Answer

A) the firm is currently earning zero profit. 
B) the profits of the firm are negative. 
C) firms are likely to enter this market in the long run. 
D) the firm would earn more profit by reducing output. 
A) the firm is currently earning zero profit. 
B) the profits of the firm are negative. 
C) firms are likely to enter this market in the long run. 
D) the firm would earn more profit by reducing output.

Question 17

In order for a firm to be able to engage in price discrimination,it must be able to

Accepted Answer

A) identify and separate groups with different price elasticities of demand. 
B) prevent resale of the product between customer groups. 
C) maximize profits at the point where average total cost is minimized. 
D) do both a and b,but not c. 
A) identify and separate groups with different price elasticities of demand. 
B) prevent resale of the product between customer groups. 
C) maximize profits at the point where average total cost is minimized. 
D) do both a and b,but not c.

Question 18

Figure 10-14
  
-Refer to Figure 10-14.In the long run,we would expect

Accepted Answer

A) more firms to enter this industry until zero economic profits are restored. 
B) firms to exit this industry until zero economic profits are restored. 
C) the number of firms to remain constant and existing firms will continue to suffer economic losses in the long run. 
D) the number of firms to remain constant and existing firms will continue to earn economic profits in the long run. 
A) more firms to enter this industry until zero economic profits are restored. 
B) firms to exit this industry until zero economic profits are restored. 
C) the number of firms to remain constant and existing firms will continue to suffer economic losses in the long run. 
D) the number of firms to remain constant and existing firms will continue to earn economic profits in the long run.

Question 19

Figure 10-8
  
-Figure 10-8 presents the demand,marginal revenue,and cost curves for a typical firm in a market.This figure illustrates

Accepted Answer

A) short-run equilibrium in a competitive price-taker market. 
B) long-run equilibrium in a competitive price-taker market. 
C) short-run equilibrium in a competitive price-searcher market. 
D) long-run equilibrium in a competitive price-searcher market. 
A) short-run equilibrium in a competitive price-taker market. 
B) long-run equilibrium in a competitive price-taker market. 
C) short-run equilibrium in a competitive price-searcher market. 
D) long-run equilibrium in a competitive price-searcher market.

Question 20

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

Exam 23: Price-Searcher Markets With Low Entry Barriers

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

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

Figure 10-6 -Given that the short-run cost and demand conditions shown in Figure 10-6 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 variables is left out of the simple economic model of the firm?

Figure 10-14 -Refer to Figure 10-14.The firm is currently earning an economic

In the real world,when there is no decision rule that can be applied using only information that is freely available,which of the following is most needed?

In the short run,Fed Ex,a price searcher wishing to maximize profits or minimize losses,should produce the output that

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?

Which of the following characteristics is true for a competitive price searcher but not for a price taker?

A price-discriminating firm charges the lowest price to the group that

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

Which of the following is a characteristic of a contestable market?

In a competitive price-searcher market,the firms will

Figure 10-5 -Given the cost and demand conditions depicted in Figure 10-5 for the competitive price-searcher firm,what is the price that the firm should charge if it wants to maximize its profit?

Which of the following is not a necessary condition for effective price discrimination?

A competitive price-searcher firm is currently producing 10 units of output.At this level of output the firm is charging a price equal to $10,has marginal revenue equal to $6,has marginal cost equal to $6,and has average total cost equal to $12.From this information we can conclude that

In order for a firm to be able to engage in price discrimination,it must be able to

Figure 10-14 -Refer to Figure 10-14.In the long run,we would expect

Figure 10-8 -Figure 10-8 presents the demand,marginal revenue,and cost curves for a typical firm in a market.This figure illustrates

Figure 10-2 -What is the maximum economic profit this firm depicted in Figure 10-2 will be able to earn?

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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