Question 1

A firm that uses price discrimination to enhance its net revenues will

Accepted Answer

A) expand output as long as price exceeds average total costs. 
B) expand output as long as average total costs are declining. 
C) charge a higher price to consumers with a more elastic demand for the firm's product. 
D) charge a lower price to consumers with a more elastic demand for the firm's product. 
A) expand output as long as price exceeds average total costs. 
B) expand output as long as average total costs are declining. 
C) charge a higher price to consumers with a more elastic demand for the firm's product. 
D) charge a lower price to consumers with a more elastic demand for the firm's product.

Question 2

The idea that business failure is a positive force for progress in a market economy is often summarized by the term "creative destruction." Which of the following best states the central idea of this principle?

Accepted Answer

A) When a business fails,the assets and resources from that business become unemployed,resulting in higher government subsidies. 
B) Business failure allows the assets and resources from that business to move into other areas where those resources are now more productive and highly valued. 
C) Only through frequent business failure will it be possible to avoid income being concentrated in a few rich entrepreneurs. 
D) The new,rival businesses that drive out old competitors tend to be less efficient and less creative than the older established businesses. 
A) When a business fails,the assets and resources from that business become unemployed,resulting in higher government subsidies. 
B) Business failure allows the assets and resources from that business to move into other areas where those resources are now more productive and highly valued. 
C) Only through frequent business failure will it be possible to avoid income being concentrated in a few rich entrepreneurs. 
D) The new,rival businesses that drive out old competitors tend to be less efficient and less creative than the older established businesses.

Question 3

Some economists argue that competitive price-searcher markets are inefficient because

Accepted Answer

A) the firms earn economic profits in the long run. 
B) the firms' marginal costs and marginal revenues are not always equal. 
C) firms do not produce the output rate that would minimize their average total costs. 
D) barriers to entry are high. 
A) the firms earn economic profits in the long run. 
B) the firms' marginal costs and marginal revenues are not always equal. 
C) firms do not produce the output rate that would minimize their average total costs. 
D) barriers to entry are high.

Question 4

In both price-taker and competitive price-searcher markets,short-run economic profits will lead to

Accepted Answer

A) firms being able to sustain those economic profits into the long run. 
B) the exit of firms from the market and the eventual restoration of zero long-run economic profits. 
C) the entry of additional firms into the market and the eventual restoration of zero long-run economic profits. 
D) none of the above. 
A) firms being able to sustain those economic profits into the long run. 
B) the exit of firms from the market and the eventual restoration of zero long-run economic profits. 
C) the entry of additional firms into the market and the eventual restoration of zero long-run economic profits. 
D) none of the above.

Question 5

Which of the following must be true if a price-searcher firm is operating at the profit-maximizing output rate?

Accepted Answer

A) The marginal cost of producing the last unit is greater than the marginal revenue derived from its sale. 
B) The marginal cost of producing the last unit is no greater than the marginal revenue derived from its sale. 
C) The total cost of producing all units is no greater than the total revenue derived from the sale of the units. 
D) The total cost of producing all units is less than the total revenue derived from the sale of the units. 
A) The marginal cost of producing the last unit is greater than the marginal revenue derived from its sale. 
B) The marginal cost of producing the last unit is no greater than the marginal revenue derived from its sale. 
C) The total cost of producing all units is no greater than the total revenue derived from the sale of the units. 
D) The total cost of producing all units is less than the total revenue derived from the sale of the units.

Question 6

The table below presents the expected cost and demand schedules confronting Handy John,a chair manufacturer.Given this information,what will be the profit (or loss)of Handy John at the profit-maximizing price?

Accepted Answer

A) $200 loss 
B) $200 profit 
C) $150 profit 
D) $500 profit 
A) $200 loss 
B) $200 profit 
C) $150 profit 
D) $500 profit

Question 7

If a market is contestable,the market will be characterized by

Accepted Answer

A) minimum-cost production methods and a competitive (normal)profit rate. 
B) high barriers to entry and a small number of suppliers. 
C) prices in excess of production costs and mergers leading to monopoly. 
D) a large number of suppliers offering a homogeneous product. 
A) minimum-cost production methods and a competitive (normal)profit rate. 
B) high barriers to entry and a small number of suppliers. 
C) prices in excess of production costs and mergers leading to monopoly. 
D) a large number of suppliers offering a homogeneous product.

Question 8

Firms that are price searchers

Accepted Answer

A) will eventually find and charge the highest price at which consumers will purchase any units. 
B) face inelastic demand curves for their products. 
C) do not confront rival sellers like price takers do. 
D) face a downward-sloping demand curve. 
A) will eventually find and charge the highest price at which consumers will purchase any units. 
B) face inelastic demand curves for their products. 
C) do not confront rival sellers like price takers do. 
D) face a downward-sloping demand curve.

Question 9

In both price-taker and competitive price-searcher markets,when an increase in market demand disrupts a long-run equilibrium,it will lead to

Accepted Answer

A) higher short-run prices and long-run profits. 
B) higher short-run prices,short-run profits,and the entry of additional firms into the market. 
C) higher short-run prices and the exit of firms from the market due to economies of scale. 
D) no change in prices in the short run,but new firms will enter in the long run. 
A) higher short-run prices and long-run profits. 
B) higher short-run prices,short-run profits,and the entry of additional firms into the market. 
C) higher short-run prices and the exit of firms from the market due to economies of scale. 
D) no change in prices in the short run,but new firms will enter in the long run.

Question 10

If a price-searcher firm can sell nine units at a price of $6,or it can sell ten units at a price of $5.75,what is the marginal revenue of the tenth unit?

Accepted Answer

A) $1 
B) $3.50 
C) $5.75 
D) $6 
A) $1 
B) $3.50 
C) $5.75 
D) $6

Question 11

Which of the following is characteristic of a firm that is a competitive price searcher?

Accepted Answer

A) The firm faces an upward-sloping demand curve. 
B) The firm faces an inelastic demand curve. 
C) The firm faces a horizontal demand curve. 
D) The firm produces a differentiated product. 
A) The firm faces an upward-sloping demand curve. 
B) The firm faces an inelastic demand curve. 
C) The firm faces a horizontal demand curve. 
D) The firm produces a differentiated product.

Question 12

Figure 10-13
  
-Refer to Figure 10-13.The firm is currently earning an economic

Accepted Answer

A) profit equal to the area CKGA. 
B) profit equal to the area DJGA. 
C) loss equal to the area CKGA. 
D) loss equal to the area DJGA. 
A) profit equal to the area CKGA. 
B) profit equal to the area DJGA. 
C) loss equal to the area CKGA. 
D) loss equal to the area DJGA.

Question 13

Figure 10-13
  
-Refer to Figure 10-13.This firm will maximize profits by producing a quantity of output equal to

Accepted Answer

A) E and charging a price equal to A. 
B) E and charging a price equal to D. 
C) F and charging a price equal to H. 
D) F and charging a price equal to C. 
A) E and charging a price equal to A. 
B) E and charging a price equal to D. 
C) F and charging a price equal to H. 
D) F and charging a price equal to C.

Question 14

Some economists have argued that competitive price-searcher industries are allocatively inefficient relative to price-taker industries because

Accepted Answer

A) unlike price takers,price searchers fail to produce at the point where marginal revenue is equal to marginal cost. 
B) competition forces price takers to find the most efficient method of production,whereas product differentiation allows competitive price searchers to stay in business even when their methods of production are inefficient. 
C) unlike price takers,price searchers do not produce at the minimum of their average total cost curves. 
D) price searchers need to pay higher salaries to their managers because of the greater amount of entrepreneurship required in price-searcher industries. 
A) unlike price takers,price searchers fail to produce at the point where marginal revenue is equal to marginal cost. 
B) competition forces price takers to find the most efficient method of production,whereas product differentiation allows competitive price searchers to stay in business even when their methods of production are inefficient. 
C) unlike price takers,price searchers do not produce at the minimum of their average total cost curves. 
D) price searchers need to pay higher salaries to their managers because of the greater amount of entrepreneurship required in price-searcher industries.

Question 15

In a competitive price-searcher market,the marginal revenue of the firm will always be

Accepted Answer

A) a horizontal line. 
B) greater than price. 
C) less than price. 
D) equal to price. 
A) a horizontal line. 
B) greater than price. 
C) less than price. 
D) equal to price.

Question 16

Figure 10-4
  
-What price should a competitive price-searcher firm with the cost and demand conditions depicted in Figure 10-4 charge if it wants to maximize its profit?

Accepted Answer

A) $10 
B) $15 
C) $20 
D) $24 
A) $10 
B) $15 
C) $20 
D) $24

Question 17

When a firm is a price searcher,its marginal revenue is

Accepted Answer

A) equal to price because the firm's demand curve is perfectly elastic. 
B) equal to price if,and only if,the firm is maximizing profits. 
C) less than price when the firm is maximizing profits. 
D) equal to average total cost at the long-run equilibrium output rate. 
A) equal to price because the firm's demand curve is perfectly elastic. 
B) equal to price if,and only if,the firm is maximizing profits. 
C) less than price when the firm is maximizing profits. 
D) equal to average total cost at the long-run equilibrium output rate.

Question 18

Figure 10-9
  
-What is the maximum economic profit this firm depicted in Figure 10-9 will be able to earn?

Accepted Answer

A) zero profit 
B) $200 profit 
C) $400 profit 
D) $600 profit 
A) zero profit 
B) $200 profit 
C) $400 profit 
D) $600 profit

Question 19

Whenever firms can freely enter and exit a market,

Accepted Answer

A) firms can never earn a profit. 
B) prices will be the same for all firms in the market. 
C) products will be identical for all firms in the market. 
D) profits and losses play an important role in determining the size of the industry. 
A) firms can never earn a profit. 
B) prices will be the same for all firms in the market. 
C) products will be identical for all firms in the market. 
D) profits and losses play an important role in determining the size of the industry.

Question 20

When economic losses are present in a market,firms will tend to

Accepted Answer

A) exit from the market. 
B) raise their prices until the break-even point is reached. 
C) lower their prices,regardless of cost,so they can capture more of the market. 
D) increase output. 
A) exit from the market. 
B) raise their prices until the break-even point is reached. 
C) lower their prices,regardless of cost,so they can capture more of the market. 
D) increase output.

Exam 23: Price-Searcher Markets With Low Entry Barriers

A firm that uses price discrimination to enhance its net revenues will

The idea that business failure is a positive force for progress in a market economy is often summarized by the term "creative destruction." Which of the following best states the central idea of this principle?

Some economists argue that competitive price-searcher markets are inefficient because

In both price-taker and competitive price-searcher markets,short-run economic profits will lead to

Which of the following must be true if a price-searcher firm is operating at the profit-maximizing output rate?

The table below presents the expected cost and demand schedules confronting Handy John,a chair manufacturer.Given this information,what will be the profit (or loss)of Handy John at the profit-maximizing price?

If a market is contestable,the market will be characterized by

Firms that are price searchers

In both price-taker and competitive price-searcher markets,when an increase in market demand disrupts a long-run equilibrium,it will lead to

If a price-searcher firm can sell nine units at a price of $6,or it can sell ten units at a price of $5.75,what is the marginal revenue of the tenth unit?

Which of the following is characteristic of a firm that is a competitive price searcher?

Figure 10-13 -Refer to Figure 10-13.The firm is currently earning an economic

Figure 10-13 -Refer to Figure 10-13.This firm will maximize profits by producing a quantity of output equal to

Some economists have argued that competitive price-searcher industries are allocatively inefficient relative to price-taker industries because

In a competitive price-searcher market,the marginal revenue of the firm will always be

Figure 10-4 -What price should a competitive price-searcher firm with the cost and demand conditions depicted in Figure 10-4 charge if it wants to maximize its profit?

When a firm is a price searcher,its marginal revenue is

Figure 10-9 -What is the maximum economic profit this firm depicted in Figure 10-9 will be able to earn?

Whenever firms can freely enter and exit a market,

When economic losses are present in a market,firms will tend to

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