Question 1

Airlines generally charge travelers willing to stay over Saturday night lower fares because

Accepted Answer

A) these travelers have lower incomes,and therefore,the airlines would like to help them. 
B) it cost less to transport travelers willing to stay over a Saturday night. 
C) the demand of these travelers is elastic,and therefore,the lower fares generate more revenue. 
D) the demand of these travelers is inelastic,and therefore,the lower fares generate more revenue for the airlines. 
A) these travelers have lower incomes,and therefore,the airlines would like to help them. 
B) it cost less to transport travelers willing to stay over a Saturday night. 
C) the demand of these travelers is elastic,and therefore,the lower fares generate more revenue. 
D) the demand of these travelers is inelastic,and therefore,the lower fares generate more revenue for the airlines.

Question 2

Which of the following is most vital if the firms in an industry are going to earn economic profit in the long run?

Accepted Answer

A) an inelastic demand for the product produced by the firms 
B) an elastic demand for the product produced by the firms 
C) managerial efficiency 
D) high barriers to entry into the industry 
A) an inelastic demand for the product produced by the firms 
B) an elastic demand for the product produced by the firms 
C) managerial efficiency 
D) high barriers to entry into the industry

Question 3

If a firm in a competitive price-searcher market finds that its marginal revenue exceeds its marginal cost at the current rate of output,it should

Accepted Answer

A) raise the price of the product and expand its output. 
B) raise the price of the product and reduce its output. 
C) lower the price of the product and expand its output. 
D) lower the price of the product and reduce its output. 
A) raise the price of the product and expand its output. 
B) raise the price of the product and reduce its output. 
C) lower the price of the product and expand its output. 
D) lower the price of the product and reduce its output.

Question 4

Which of the following is a necessary condition for price discrimination to be profitable?

Accepted Answer

A) All consumers must have identical preferences. 
B) It must be easy to distinguish consumer groups with differing responses to higher prices. 
C) The seller must face a horizontal demand curve for its product in at least one part of the market. 
D) Both b and c are correct. 
A) All consumers must have identical preferences. 
B) It must be easy to distinguish consumer groups with differing responses to higher prices. 
C) The seller must face a horizontal demand curve for its product in at least one part of the market. 
D) Both b and c are correct.

Question 5

When a firm exits a competitive price-searcher market,the individual demand curves faced by all remaining firms in that market will

Accepted Answer

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

Question 6

If a firm in a competitive price-searcher market finds that its marginal cost exceeds its marginal revenue at the current rate of output,it should

Accepted Answer

A) raise the price of the product and expand its output. 
B) raise the price of the product and reduce its output. 
C) lower the price of the product and expand its output. 
D) lower the price of the product and reduce its output. 
A) raise the price of the product and expand its output. 
B) raise the price of the product and reduce its output. 
C) lower the price of the product and expand its output. 
D) lower the price of the product and reduce its output.

Question 7

Given the following price and output schedule,how many units should this price-searcher firm produce in order to maximize profits?

Accepted Answer

A) 1 
B) 2 
C) 3 
D) 4 
A) 1 
B) 2 
C) 3 
D) 4

Question 8

Entrepreneurial judgment

Accepted Answer

A) is necessary to make business decisions when no fixed decision rule can be used. 
B) is fully incorporated into modern economic models of business behavior. 
C) requires decision makers to follow carefully defined rules regarding uncertainty,discovery,and business judgment. 
D) requires government advice and regulation. 
A) is necessary to make business decisions when no fixed decision rule can be used. 
B) is fully incorporated into modern economic models of business behavior. 
C) requires decision makers to follow carefully defined rules regarding uncertainty,discovery,and business judgment. 
D) requires government advice and regulation.

Question 9

In the long run the prices charged by a firm in a competitive price-searcher market will be

Accepted Answer

A) high enough to provide profits to the firm. 
B) so low that many firms will drop out of the industry. 
C) equal to marginal cost. 
D) equal to average cost,including the opportunity cost of capital. 
A) high enough to provide profits to the firm. 
B) so low that many firms will drop out of the industry. 
C) equal to marginal cost. 
D) equal to average cost,including the opportunity cost of capital.

Question 10

Figure 10-10
  
-Given the cost and demand conditions depicted in Figure 10-10 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 11

The firms in a competitive price-searcher market produce goods and services that are

Accepted Answer

A) identical to one another in quality and price. 
B) identical to one another in quality but not in price. 
C) identical to one another in price but not in quality. 
D) different from one another. 
A) identical to one another in quality and price. 
B) identical to one another in quality but not in price. 
C) identical to one another in price but not in quality. 
D) different from one another.

Question 12

Figure 10-12

-Refer to Figure 10-12.Panel (b)is consistent with a firm in a competitive price-searcher market that is

Accepted Answer

A) not in long-run equilibrium. 
B) in long-run equilibrium. 
C) producing its efficient scale of output. 
D) earning a positive economic profit. 
A) not in long-run equilibrium. 
B) in long-run equilibrium. 
C) producing its efficient scale of output. 
D) earning a positive economic profit.

Question 13

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 14

Which of the following statements about price discrimination is correct?

Accepted Answer

A) A price discriminating firm will want to charge a higher price to the consumer group with the more inelastic demand. 
B) A firm will always be able to increase its profit by price discriminating rather than charging the same price to all customers. 
C) Price discrimination will be most effective when buyers can easily resell the product amongst themselves. 
D) Each consumer will pay a higher price when a firm is a price discriminator than would be the case if all customers were charged the same price. 
A) A price discriminating firm will want to charge a higher price to the consumer group with the more inelastic demand. 
B) A firm will always be able to increase its profit by price discriminating rather than charging the same price to all customers. 
C) Price discrimination will be most effective when buyers can easily resell the product amongst themselves. 
D) Each consumer will pay a higher price when a firm is a price discriminator than would be the case if all customers were charged the same price.

Question 15

Which of the following provides the strongest evidence that a firm operating in the highly competitive retail sector is supplying goods and services that consumers value highly relative to their cost?

Accepted Answer

A) The top-level managers of the firm are paid high salaries. 
B) The firm is on the verge of bankruptcy. 
C) The firm is a large corporation. 
D) The firm is highly profitable,and its sales have grown rapidly. 
A) The top-level managers of the firm are paid high salaries. 
B) The firm is on the verge of bankruptcy. 
C) The firm is a large corporation. 
D) The firm is highly profitable,and its sales have grown rapidly.

Question 16

Suppose housing construction is a price-searcher market with low barriers to entry.Which of the following will be true for this market?

Accepted Answer

A) The output of the housing construction firms will be produced inefficiently. 
B) Consumers would be better off if there were fewer firms and less variety in the housing market. 
C) If firms produced larger quantities but less variety,they could reduce the per-unit costs. 
D) Consumers do not have to pay for variety in the housing construction market. 
A) The output of the housing construction firms will be produced inefficiently. 
B) Consumers would be better off if there were fewer firms and less variety in the housing market. 
C) If firms produced larger quantities but less variety,they could reduce the per-unit costs. 
D) Consumers do not have to pay for variety in the housing construction market.

Question 17

When a profit-maximizing firm in a competitive price-searcher market is in long-run equilibrium,price equals

Accepted Answer

A) marginal cost,and profits are positive. 
B) average total cost,and profits are zero. 
C) marginal cost,and profits are zero. 
D) average total cost,and profits are positive. 
A) marginal cost,and profits are positive. 
B) average total cost,and profits are zero. 
C) marginal cost,and profits are zero. 
D) average total cost,and profits are positive.

Question 18

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 19

The free entry and exit of firms in a competitive price-searcher market guarantees that

Accepted Answer

A) both economic profits and economic losses can persist in the long run. 
B) both economic profits and economic losses disappear in the long run. 
C) economic profits,but not economic losses,can persist in the long run. 
D) economic losses,but not economic profits,can persist in the long run. 
A) both economic profits and economic losses can persist in the long run. 
B) both economic profits and economic losses disappear in the long run. 
C) economic profits,but not economic losses,can persist in the long run. 
D) economic losses,but not economic profits,can persist in the long run.

Question 20

Sellers in competitive price-searcher markets

Accepted Answer

A) face competition both from existing firms and potential new entrants. 
B) face competition from existing firms but not from potential new entrants. 
C) face competition only from potential new entrants and only in the long run. 
D) can compete only by product quality since product prices are set by market forces. 
A) face competition both from existing firms and potential new entrants. 
B) face competition from existing firms but not from potential new entrants. 
C) face competition only from potential new entrants and only in the long run. 
D) can compete only by product quality since product prices are set by market forces.

Exam 23: Price-Searcher Markets With Low Entry Barriers

Airlines generally charge travelers willing to stay over Saturday night lower fares because

Which of the following is most vital if the firms in an industry are going to earn economic profit in the long run?

If a firm in a competitive price-searcher market finds that its marginal revenue exceeds its marginal cost at the current rate of output,it should

Which of the following is a necessary condition for price discrimination to be profitable?

When a firm exits a competitive price-searcher market,the individual demand curves faced by all remaining firms in that market will

If a firm in a competitive price-searcher market finds that its marginal cost exceeds its marginal revenue at the current rate of output,it should

Given the following price and output schedule,how many units should this price-searcher firm produce in order to maximize profits?

Entrepreneurial judgment

In the long run the prices charged by a firm in a competitive price-searcher market will be

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

The firms in a competitive price-searcher market produce goods and services that are

Figure 10-12 -Refer to Figure 10-12.Panel (b)is consistent with a firm in a competitive price-searcher market that is

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

Which of the following statements about price discrimination is correct?

Which of the following provides the strongest evidence that a firm operating in the highly competitive retail sector is supplying goods and services that consumers value highly relative to their cost?

Suppose housing construction is a price-searcher market with low barriers to entry.Which of the following will be true for this market?

When a profit-maximizing firm in a competitive price-searcher market is in long-run equilibrium,price equals

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?

The free entry and exit of firms in a competitive price-searcher market guarantees that

Sellers in 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

Filters