Question 1

Only undertaking an activity when it adds more to revenue than to cost is the decision rule a profit-maximizing firm will use when deciding upon

Accepted Answer

A) the level of output to produce. 
B) the amount of advertising to undertake. 
C) the level of product quality (for example,how many years it is designed to last). 
D) all of the above. 
A) the level of output to produce. 
B) the amount of advertising to undertake. 
C) the level of product quality (for example,how many years it is designed to last). 
D) all of the above.

Question 2

Which of the following is a true statement about the difference between a price-taker firm and a competitive price-searcher firm in the long run?

Accepted Answer

A) Both will sell their products at a price equal to average total cost,but only the price taker will produce at minimum average total cost. 
B) Both will sell their products at a price equal to average total cost,but only the competitive price searcher will produce at minimum average total cost. 
C) Only the price taker will sell its product at a price equal to average total cost. 
D) Only the competitive price searcher will sell its product at a price equal to average total cost. 
A) Both will sell their products at a price equal to average total cost,but only the price taker will produce at minimum average total cost. 
B) Both will sell their products at a price equal to average total cost,but only the competitive price searcher will produce at minimum average total cost. 
C) Only the price taker will sell its product at a price equal to average total cost. 
D) Only the competitive price searcher will sell its product at a price equal to average total cost.

Question 3

The practice of price discrimination has which of the following effects?

Accepted Answer

A) Groups with the higher elasticity of demand will pay higher prices. 
B) Groups with the lower elasticity of demand will pay higher prices. 
C) With price discrimination,total output and allocative efficiency will fall. 
D) Groups will pay identical prices that are exactly equal to the firm's marginal cost. 
A) Groups with the higher elasticity of demand will pay higher prices. 
B) Groups with the lower elasticity of demand will pay higher prices. 
C) With price discrimination,total output and allocative efficiency will fall. 
D) Groups will pay identical prices that are exactly equal to the firm's marginal cost.

Question 4

Figure 10-3
  
-If the cost and demand conditions of this competitive price-searcher firm depicted in Figure 10-3 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 the market price 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 the market price will decline. 
D) The firms in this industry probably will collude in order to increase their profitability.

Question 5

What type of model would be best if we wanted to analyze the market for fast food? Why?

Accepted Answer

We know that the industry produces a dif

Question 6

Figure 10-1
  
-Given the cost and demand conditions in Figure 10-1,what price should this competitive price-searcher firm charge in order to maximize profits?

Accepted Answer

A) P₁ 
B) P₂ 
C) P₃ 
D) P₄ 
A) P₁ 
B) P₂ 
C) P₃ 
D) P₄

Question 7

If a new entrant (or an established firm)wants to leave a contestable market,

Accepted Answer

A) all,or nearly all of,the invested capital values can be recovered. 
B) another firm will always enter to take its place. 
C) it must accept large losses in its capital investment,so it is unlikely to exit. 
D) its leaving will be contested by regulators in the market who seek to prevent exit. 
A) all,or nearly all of,the invested capital values can be recovered. 
B) another firm will always enter to take its place. 
C) it must accept large losses in its capital investment,so it is unlikely to exit. 
D) its leaving will be contested by regulators in the market who seek to prevent exit.

Question 8

Relative to a situation where only a single price is charged,a seller that engages in price discrimination will

Accepted Answer

A) charge consumers with an inelastic demand a lower price. 
B) charge consumers with an elastic demand a higher price. 
C) generally produce a larger total output. 
D) decrease social welfare and make all consumers worse off. 
A) charge consumers with an inelastic demand a lower price. 
B) charge consumers with an elastic demand a higher price. 
C) generally produce a larger total output. 
D) decrease social welfare and make all consumers worse off.

Question 9

Figure 10-9
  
-What price should a competitive price-searcher firm charge with the cost and demand conditions depicted in Figure 10-9 if it wants to maximize its profit?

Accepted Answer

A) $12 
B) $16 
C) $20 
D) $24 
A) $12 
B) $16 
C) $20 
D) $24

Question 10

Monopolistic competition is a term referring to markets characterized by

Accepted Answer

A) price-taker firms. 
B) price-searcher firms in markets with low barriers to entry. 
C) price-searcher firms in markets with high barriers to entry. 
D) oligopoly,a small number of sellers. 
A) price-taker firms. 
B) price-searcher firms in markets with low barriers to entry. 
C) price-searcher firms in markets with high barriers to entry. 
D) oligopoly,a small number of sellers.

Question 11

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

Accepted Answer

A) The firm is making losses,and its sales are declining. 
B) The top-level managers of the firm are paid high salaries. 
C) The wages earned by the employees of the firm are low. 
D) The firm is a large corporation. 
E) The firm is highly profitable,and its sales have grown rapidly. 
A) The firm is making losses,and its sales are declining. 
B) The top-level managers of the firm are paid high salaries. 
C) The wages earned by the employees of the firm are low. 
D) The firm is a large corporation. 
E) The firm is highly profitable,and its sales have grown rapidly.

Question 12

Which is the best example of price discrimination?

Accepted Answer

A) The clearance section at Target. 
B) The dollar menu at McDonalds. 
C) Airline ticket prices. 
D) A fancy restaurant that charges high prices on its menu. 
A) The clearance section at Target. 
B) The dollar menu at McDonalds. 
C) Airline ticket prices. 
D) A fancy restaurant that charges high prices on its menu.

Question 13

Because barriers to entry are low in competitive price-searcher markets,in the long run,a firm's price will be equal to

Accepted Answer

A) marginal revenue. 
B) average total cost. 
C) average variable cost. 
D) average fixed cost. 
A) marginal revenue. 
B) average total cost. 
C) average variable cost. 
D) average fixed cost.

Question 14

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 15

Figure 10-11

-Refer to Figure 10-11.Which of the graphs shown would be consistent with a firm in a competitive price-searcher market that is maximizing profit but profit is still negative?

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 16

An important variable that is left out of economic models is

Accepted Answer

A) implicit costs. 
B) excess profits. 
C) entrepreneurship. 
D) the opportunity cost of resources. 
A) implicit costs. 
B) excess profits. 
C) entrepreneurship. 
D) the opportunity cost of resources.

Question 17

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

Accepted Answer

A) zero profit 
B) $50,000 profit 
C) $200,000 profit 
D) $400,000 profit 
A) zero profit 
B) $50,000 profit 
C) $200,000 profit 
D) $400,000 profit

Question 18

A market will tend to be more competitive when

Accepted Answer

A) there are a small number of firms in the market. 
B) similar products are available from alternative sellers. 
C) entry barriers into the market are high. 
D) governments require firms to meet strict regulatory standards. 
A) there are a small number of firms in the market. 
B) similar products are available from alternative sellers. 
C) entry barriers into the market are high. 
D) governments require firms to meet strict regulatory standards.

Question 19

Which of the following conditions is most essential if a firm is going to earn long-run economic profits?

Accepted Answer

A) an inelastic market demand for the product 
B) a small number of firms,even though competitors are free to enter the industry 
C) a differentiated product 
D) restrictions that limit the entry of potential competitors into the industry 
A) an inelastic market demand for the product 
B) a small number of firms,even though competitors are free to enter the industry 
C) a differentiated product 
D) restrictions that limit the entry of potential competitors into the industry

Question 20

A competitive price-searcher market is best described as

Accepted Answer

A) many firms with some control over price,and some product differentiation. 
B) many firms with no control over price,producing identical products. 
C) a few firms with some control over price,producing highly differentiated products. 
D) a few firms with no control over price,producing similar products. 
E) a single firm producing all of the output for the industry,with strong control over price. 
A) many firms with some control over price,and some product differentiation. 
B) many firms with no control over price,producing identical products. 
C) a few firms with some control over price,producing highly differentiated products. 
D) a few firms with no control over price,producing similar products. 
E) a single firm producing all of the output for the industry,with strong control over price.

Exam 23: Price-Searcher Markets With Low Entry Barriers

Only undertaking an activity when it adds more to revenue than to cost is the decision rule a profit-maximizing firm will use when deciding upon

Which of the following is a true statement about the difference between a price-taker firm and a competitive price-searcher firm in the long run?

The practice of price discrimination has which of the following effects?

Figure 10-3 -If the cost and demand conditions of this competitive price-searcher firm depicted in Figure 10-3 are representative of the market,what will happen in the future?

What type of model would be best if we wanted to analyze the market for fast food? Why?

Figure 10-1 -Given the cost and demand conditions in Figure 10-1,what price should this competitive price-searcher firm charge in order to maximize profits?

If a new entrant (or an established firm)wants to leave a contestable market,

Relative to a situation where only a single price is charged,a seller that engages in price discrimination will

Figure 10-9 -What price should a competitive price-searcher firm charge with the cost and demand conditions depicted in Figure 10-9 if it wants to maximize its profit?

Monopolistic competition is a term referring to markets characterized by

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

Which is the best example of price discrimination?

Because barriers to entry are low in competitive price-searcher markets,in the long run,a firm's price will be equal to

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

Figure 10-11 -Refer to Figure 10-11.Which of the graphs shown would be consistent with a firm in a competitive price-searcher market that is maximizing profit but profit is still negative?

An important variable that is left out of economic models is

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

A market will tend to be more competitive when

Which of the following conditions is most essential if a firm is going to earn long-run economic profits?

A competitive price-searcher market is best described as

The Economic Approach

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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

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Amoney and the Banking System

Modern Macroeconomics and Monetary Policy

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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

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