Question 1

If economic profits were present in a competitive price-searcher industry,

Accepted Answer

A) production inefficiency would develop,causing costs to increase until the profits had been eliminated. 
B) firms would operate in the short run,but they would be forced out of business in the long run as competition eliminated the economic profit. 
C) competition from new entrants would occur until the economic profits had been eliminated. 
D) the firms would eventually find these profits offset by long-run economic losses. 
A) production inefficiency would develop,causing costs to increase until the profits had been eliminated. 
B) firms would operate in the short run,but they would be forced out of business in the long run as competition eliminated the economic profit. 
C) competition from new entrants would occur until the economic profits had been eliminated. 
D) the firms would eventually find these profits offset by long-run economic losses.

Question 2

The traditional view of competitive price-searcher markets holds that this type of market structure is inefficient because

Accepted Answer

A) there are too few firms to reach an efficient level of competition. 
B) barriers to entry are high. 
C) excessive advertising is encouraged. 
D) consumers are not allowed a sufficient amount of choice in which to express their individual preferences. 
A) there are too few firms to reach an efficient level of competition. 
B) barriers to entry are high. 
C) excessive advertising is encouraged. 
D) consumers are not allowed a sufficient amount of choice in which to express their individual preferences.

Question 3

Which of the following is true for a price-searcher firm?

Accepted Answer

A) Its marginal revenue curve will lie below its demand curve. 
B) Its marginal revenue curve will lie above its demand curve. 
C) Its marginal revenue curve is equal to its demand curve. 
D) Its marginal revenue curve is horizontal at the market equilibrium price. 
A) Its marginal revenue curve will lie below its demand curve. 
B) Its marginal revenue curve will lie above its demand curve. 
C) Its marginal revenue curve is equal to its demand curve. 
D) Its marginal revenue curve is horizontal at the market equilibrium price.

Question 4

What role do losses play in a competitive price-searcher market?

Accepted Answer

A) They penalize a firm for producing a differentiated product. 
B) They signal that more resources are needed in a particular market. 
C) They show firms that barriers to entry are high. 
D) They send a message that more value would be created if the resources were used to produce other goods. 
A) They penalize a firm for producing a differentiated product. 
B) They signal that more resources are needed in a particular market. 
C) They show firms that barriers to entry are high. 
D) They send a message that more value would be created if the resources were used to produce other goods.

Question 5

If a price searcher is producing at a level of output such that its marginal cost is $5 and its marginal revenue is $3,the firm should

Accepted Answer

A) increase output in order to reduce per-unit costs. 
B) decrease the price of its product and expand output. 
C) increase price and reduce its rate of output. 
D) reduce both price and output. 
A) increase output in order to reduce per-unit costs. 
B) decrease the price of its product and expand output. 
C) increase price and reduce its rate of output. 
D) reduce both price and output.

Question 6

If firms in a competitive price-searcher market are currently earning economic losses,then in the long run,

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 7

Given the data shown in the table,what price and output level would a profit-maximizing price searcher choose?

Accepted Answer

A) price of $8,output of 3 units 
B) price of $7,output of 4 units 
C) price of $6,output of 5 units 
D) price of $5,output of 6 units 
A) price of $8,output of 3 units 
B) price of $7,output of 4 units 
C) price of $6,output of 5 units 
D) price of $5,output of 6 units

Question 8

Economic analysis suggest that in a competitive market economy,when an entrepreneur has made a large profit,

Accepted Answer

A) consumer benefits must have been reduced by at least the amount of the profit. 
B) other producers have lost profits of the same size. 
C) economic progress for society as a whole has normally been enhanced. 
D) luck or chance,rather than productive activity,has nearly always been the largest factor. 
A) consumer benefits must have been reduced by at least the amount of the profit. 
B) other producers have lost profits of the same size. 
C) economic progress for society as a whole has normally been enhanced. 
D) luck or chance,rather than productive activity,has nearly always been the largest factor.

Question 9

In order to be successful in a competitive market economy,an entrepreneur must

Accepted Answer

A) provide buyers at least as much satisfaction per dollar spent as the buyer could get elsewhere. 
B) supply consumers with goods and services valued less highly than the resources necessary to produce them. 
C) take resources from other producers,thus reallocating wealth but not creating new wealth. 
D) gain government grants and subsidies. 
A) provide buyers at least as much satisfaction per dollar spent as the buyer could get elsewhere. 
B) supply consumers with goods and services valued less highly than the resources necessary to produce them. 
C) take resources from other producers,thus reallocating wealth but not creating new wealth. 
D) gain government grants and subsidies.

Question 10

A practice whereby a seller charges different prices to different consumers of the same product or service is called

Accepted Answer

A) price discrimination. 
B) oligopolistic pricing. 
C) stay-out pricing. 
D) monopolistic pricing. 
A) price discrimination. 
B) oligopolistic pricing. 
C) stay-out pricing. 
D) monopolistic pricing.

Question 11

An important difference between the situation faced by a profit-maximizing competitive price-searcher firm in the short run and the situation faced by that same firm in the long run is that in the short run,

Accepted Answer

A) price may exceed marginal revenue,but in the long run,price will equal marginal revenue. 
B) price may exceed marginal cost,but in the long run,price will equal marginal cost. 
C) price may exceed average total cost,but in the long run,price will equal average total cost. 
D) there are many firms in the market,but in the long run,there are only a few firms in the market. 
A) price may exceed marginal revenue,but in the long run,price will equal marginal revenue. 
B) price may exceed marginal cost,but in the long run,price will equal marginal cost. 
C) price may exceed average total cost,but in the long run,price will equal average total cost. 
D) there are many firms in the market,but in the long run,there are only a few firms in the market.

Question 12

Compared to the outcome when the firms are price takers,competitive price-searcher markets will result in

Accepted Answer

A) a wider variety of products and higher prices. 
B) less product variety and higher prices. 
C) a wider variety of products and lower prices. 
D) less product variety and lower prices. 
A) a wider variety of products and higher prices. 
B) less product variety and higher prices. 
C) a wider variety of products and lower prices. 
D) less product variety and lower prices.

Question 13

Figure 10-13
  
-Refer to Figure 10-13.In the long run,we would expect the firm's

Accepted Answer

A) ATC curve to fall as firms enter the industry,forcing the firm to increase its efficiency. 
B) demand curve to decrease as firms enter the industry due to the presence of positive economic profits. 
C) demand curve to increase as firms exit the industry due to the presence of economic losses. 
D) demand curve to shift such that marginal revenue and marginal cost intersect at quantity F--the point where average total cost is at a minimum. 
A) ATC curve to fall as firms enter the industry,forcing the firm to increase its efficiency. 
B) demand curve to decrease as firms enter the industry due to the presence of positive economic profits. 
C) demand curve to increase as firms exit the industry due to the presence of economic losses. 
D) demand curve to shift such that marginal revenue and marginal cost intersect at quantity F--the point where average total cost is at a minimum.

Question 14

When the firm is a price searcher,the marginal revenue of selling the tenth unit is the

Accepted Answer

A) sales price of the tenth unit. 
B) change in total revenue that results from selling the tenth unit. 
C) change in total cost that results from producing the tenth unit. 
D) change in total revenue that results from selling the ninth unit. 
A) sales price of the tenth unit. 
B) change in total revenue that results from selling the tenth unit. 
C) change in total cost that results from producing the tenth unit. 
D) change in total revenue that results from selling the ninth unit.

Question 15

If a price-searcher firm can sell 4 units at a price of $6 or it can sell 5 units at a price of $5,the marginal revenue from the fifth unit is

Accepted Answer

A) $1. 
B) $5. 
C) $6. 
D) $25. 
A) $1. 
B) $5. 
C) $6. 
D) $25.

Question 16

Figure 10-7
  
-Given the cost and demand conditions shown in Figure 10-7 for the competitive price-searcher firm,what price should it charge,and what quantity should it produce in order to maximize profit?

Accepted Answer

A) It should produce 10 units and charge a price of $5 per unit. 
B) It should produce 10 units and charge a price of $8 per unit. 
C) It should produce 10 units and charge a price of $10 per unit. 
D) It should produce 18 units and charge a price of $7 per unit. 
A) It should produce 10 units and charge a price of $5 per unit. 
B) It should produce 10 units and charge a price of $8 per unit. 
C) It should produce 10 units and charge a price of $10 per unit. 
D) It should produce 18 units and charge a price of $7 per unit.

Question 17

In the real world,business decisions must be made through insight,trial,and error,without perfect knowledge about demand and costs.Will the profit-maximizing prices and levels of output from the simple economic models still be good guides to real outcomes?

Accepted Answer

A) No,because the simple economic models ignore the opportunity cost of resources. 
B) No,because even entrepreneurs who are able to find the profit-maximizing prices and level of output will be unable to compete with other entrepreneurs who charge higher prices. 
C) Yes,because they can hire economists who have sufficient knowledge of costs and demand conditions. 
D) Yes,because the entrepreneurs who are best able to find the profit-maximizing prices and output levels will survive and expand,driving others out of competitive markets. 
A) No,because the simple economic models ignore the opportunity cost of resources. 
B) No,because even entrepreneurs who are able to find the profit-maximizing prices and level of output will be unable to compete with other entrepreneurs who charge higher prices. 
C) Yes,because they can hire economists who have sufficient knowledge of costs and demand conditions. 
D) Yes,because the entrepreneurs who are best able to find the profit-maximizing prices and output levels will survive and expand,driving others out of competitive markets.

Question 18

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

Accepted Answer

A) All consumers must have an identical demand for the product. 
B) Groups of consumers with different demand elasticities must be easily distinguishable. 
C) The market demand for the product must be highly elastic. 
D) It must be possible for buyers to resell the product at a low cost. 
A) All consumers must have an identical demand for the product. 
B) Groups of consumers with different demand elasticities must be easily distinguishable. 
C) The market demand for the product must be highly elastic. 
D) It must be possible for buyers to resell the product at a low cost.

Question 19

Which of the following is a positive side effect of business start-ups and the business failures that often follow?

Accepted Answer

A) The process makes it possible to try out numerous new ideas,and some of them will substantially improve our lives. 
B) The process increases total employment,and leads to a lower rate of unemployment. 
C) The process generates additional revenue for the government,which will then be used to produce goods and services that people value. 
D) This is a trick question.There are no positive side effects of business failures. 
A) The process makes it possible to try out numerous new ideas,and some of them will substantially improve our lives. 
B) The process increases total employment,and leads to a lower rate of unemployment. 
C) The process generates additional revenue for the government,which will then be used to produce goods and services that people value. 
D) This is a trick question.There are no positive side effects of business failures.

Question 20

Which of the following is a true statement?

Accepted Answer

A) A price-taker firm can sell additional units of output without having to lower its price,while a price-searcher firm must lower its price in order to sell additional units. 
B) A price-searcher firm can sell additional units of output without having to lower its price,while a price-taker firm must lower its price in order to sell additional units. 
C) Both price searchers and price takers can sell additional units of output without having to lower their price. 
D) Both price searchers and price takers must lower their price in order to sell additional units of output. 
A) A price-taker firm can sell additional units of output without having to lower its price,while a price-searcher firm must lower its price in order to sell additional units. 
B) A price-searcher firm can sell additional units of output without having to lower its price,while a price-taker firm must lower its price in order to sell additional units. 
C) Both price searchers and price takers can sell additional units of output without having to lower their price. 
D) Both price searchers and price takers must lower their price in order to sell additional units of output.

Exam 23: Price-Searcher Markets With Low Entry Barriers

If economic profits were present in a competitive price-searcher industry,

The traditional view of competitive price-searcher markets holds that this type of market structure is inefficient because

Which of the following is true for a price-searcher firm?

What role do losses play in a competitive price-searcher market?

If a price searcher is producing at a level of output such that its marginal cost is $5 and its marginal revenue is $3,the firm should

If firms in a competitive price-searcher market are currently earning economic losses,then in the long run,

Given the data shown in the table,what price and output level would a profit-maximizing price searcher choose?

Economic analysis suggest that in a competitive market economy,when an entrepreneur has made a large profit,

In order to be successful in a competitive market economy,an entrepreneur must

A practice whereby a seller charges different prices to different consumers of the same product or service is called

An important difference between the situation faced by a profit-maximizing competitive price-searcher firm in the short run and the situation faced by that same firm in the long run is that in the short run,

Compared to the outcome when the firms are price takers,competitive price-searcher markets will result in

Figure 10-13 -Refer to Figure 10-13.In the long run,we would expect the firm's

When the firm is a price searcher,the marginal revenue of selling the tenth unit is the

If a price-searcher firm can sell 4 units at a price of $6 or it can sell 5 units at a price of $5,the marginal revenue from the fifth unit is

Figure 10-7 -Given the cost and demand conditions shown in Figure 10-7 for the competitive price-searcher firm,what price should it charge,and what quantity should it produce in order to maximize profit?

In the real world,business decisions must be made through insight,trial,and error,without perfect knowledge about demand and costs.Will the profit-maximizing prices and levels of output from the simple economic models still be good guides to real outcomes?

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

Which of the following is a positive side effect of business start-ups and the business failures that often follow?

Which of the following is a true statement?

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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