Question 1

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 2

Figure 10-12

-Refer to Figure 10-12. Which of the panels depicts a firm in a competitive price-searcher market earning positive economic profits?

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 3

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 4

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 5

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 6

The marginal revenue curve lies below the demand curve for a competitive price searcher because

Accepted Answer

A) in order for a competitive price searcher to sell an extra unit, it must cut the price on all units. The lowered price offsets the additional revenue from the extra unit sold, so the marginal revenue is lower than the price. 
B) in order for a competitive price searcher to sell an extra unit, it must increase its advertising. The cost of advertising offsets the extra revenue generated by the extra sales, so the marginal revenue is lower than the price. 
C) whenever a competitive price searcher discovers a profit-maximizing pricing policy, the economic profit it generates attracts new competitors into the industry, driving marginal revenue below the price. 
D) none of the above apply. The marginal revenue curve is the demand curve for a competitive price searcher. 
A) in order for a competitive price searcher to sell an extra unit, it must cut the price on all units. The lowered price offsets the additional revenue from the extra unit sold, so the marginal revenue is lower than the price. 
B) in order for a competitive price searcher to sell an extra unit, it must increase its advertising. The cost of advertising offsets the extra revenue generated by the extra sales, so the marginal revenue is lower than the price. 
C) whenever a competitive price searcher discovers a profit-maximizing pricing policy, the economic profit it generates attracts new competitors into the industry, driving marginal revenue below the price. 
D) none of the above apply. The marginal revenue curve is the demand curve for a competitive price searcher.

Question 7

Price searchers can be expected to charge a price that

Accepted Answer

A) is the highest at which consumers will purchase any units. 
B) they expect to provide the largest possible flow of gross revenue. 
C) minimizes their per-unit costs of production. 
D) maximizes their profit. 
A) is the highest at which consumers will purchase any units. 
B) they expect to provide the largest possible flow of gross revenue. 
C) minimizes their per-unit costs of production. 
D) maximizes their profit.

Question 8

For the competitive price searcher,

Accepted Answer

A) price will exceed marginal cost at the profit-maximizing level of output. 
B) price will equal average total cost in the long run. 
C) economic profit will be driven to zero in the long run by the entry and exit of firms. 
D) all of the above are correct. 
A) price will exceed marginal cost at the profit-maximizing level of output. 
B) price will equal average total cost in the long run. 
C) economic profit will be driven to zero in the long run by the entry and exit of firms. 
D) all of the above are correct.

Question 9

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 10

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 11

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 12

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 13

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 14

In competitive price-searcher markets, short-run economic losses will lead to

Accepted Answer

A) long-run economic losses. 
B) the exit of firms from the market and the eventual restoration of zero long-run economic profits. 
C) the entry of new firms into the market as old firms fail. 
D) the entry of additional firms into the market, causing each firm to experience an increase in demand for its product. 
A) long-run economic losses. 
B) the exit of firms from the market and the eventual restoration of zero long-run economic profits. 
C) the entry of new firms into the market as old firms fail. 
D) the entry of additional firms into the market, causing each firm to experience an increase in demand for its product.

Question 15

If a market is in long-run equilibrium, which of the following conditions will be present in a competitive price-taker market but absent from a competitive price-searcher market?

Accepted Answer

A) P = ATC 
B) MR = MC 
C) P = MC 
D) MR < P 
A) P = ATC 
B) MR = MC 
C) P = MC 
D) MR < P

Question 16

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.

Exam 10: Price-Searcher Markets With Low Entry Barriers

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

Figure 10-12 -Refer to Figure 10-12. Which of the panels depicts a firm in a competitive price-searcher market earning positive economic profits?

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 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?

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

The marginal revenue curve lies below the demand curve for a competitive price searcher because

Price searchers can be expected to charge a price that

For the competitive price searcher,

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

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?

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

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

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

In competitive price-searcher markets, short-run economic losses will lead to

If a market is in long-run equilibrium, which of the following conditions will be present in a competitive price-taker market but absent from a competitive price-searcher market?

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

The Economic Approach

A: Some Tools of the Economist

B: Some Tools of the Economist

A: Supply, Demand, and the Market Process

B: Supply, Demand, and the Market Process

A: Supply and Demand: Applications and Extensions

B: Supply and Demand: Applications and Extensions

Difficult Cases for the Market and the Role of Government

The Economics of Collective Decision-Making

Consumer Choice and Elasticity

A: Costs and the Supply of Goods

B: Costs and the Supply of Goods

A: Price Takers and the Competitive Process

B: Price Takers and the Competitive Process

A: Price-Searcher Markets With High Entry Barriers

B: Price-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

Appendix: Government Spending and Taxation

Appendix: the Economics of Social Security

Appendix: the Stock Market: Its Function, Performance, and Potential As an Investment Opportunity

Appendix: Great Debates in Economics: Keynes Versus Hayek

Appendix: the Crisis of 2008: Causes and Lessons for the Future

Appendix: Lessons From the Great Depression

Appendix: the Economics of Healthcare

Appendix:education: Problems and Performance

Appendix: Earnings Differences Between Men and Women

Appendix: the Question of Resource Exhaustion

Appendix: Do Labor Unions Increase the Wages of Workers

Appendix: Difficult Environmental Cases and the Role of Government

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