Question 1

The fact that barriers to entry are low in competitive price-searcher markets means that if current firms are making economic losses,

Accepted Answer

A) these losses will remain in the long run because no firms can exit the market. 
B) current firms will exit the market, causing the demand curves that face the remaining firms to increase. 
C) new firms will enter the market, causing the demand curves that face the existing firms to decrease. 
D) new firms will enter the market, causing no change in the demand curves that face the existing firms in the market. 
A) these losses will remain in the long run because no firms can exit the market. 
B) current firms will exit the market, causing the demand curves that face the remaining firms to increase. 
C) new firms will enter the market, causing the demand curves that face the existing firms to decrease. 
D) new firms will enter the market, causing no change in the demand curves that face the existing firms in the market.

Question 2

If Dell Computer finds that its marginal cost exceeds its marginal revenue on a model of laptop, then to maximize profit, it will

Accepted Answer

A) increase output if it is a price searcher, but this may not be proper if it is a price taker. 
B) increase output if it is a price taker, but this may not be proper if it is a price searcher. 
C) decrease output, regardless of whether it is a price taker or a price searcher. 
D) increase output, regardless of whether it is a price taker or a price searcher. 
A) increase output if it is a price searcher, but this may not be proper if it is a price taker. 
B) increase output if it is a price taker, but this may not be proper if it is a price searcher. 
C) decrease output, regardless of whether it is a price taker or a price searcher. 
D) increase output, regardless of whether it is a price taker or a price searcher.

Question 3

When you go to a grocery store, most candy bars of a given size sell for virtually the same price. Can we conclude that this is evidence of collusion on the part of candy bar manufacturers?

Accepted Answer

Probably not. The manufacturers generall

Question 4

Which of the following is true for firms that produce in markets where there are no barriers to entry?

Accepted Answer

A) The firms will always make positive economic profits in the long run. 
B) The firms will always make positive economic profits in the short run. 
C) The firms will always make zero economic profits in the short run. 
D) The firms will always make zero economic profits in the long run. 
A) The firms will always make positive economic profits in the long run. 
B) The firms will always make positive economic profits in the short run. 
C) The firms will always make zero economic profits in the short run. 
D) The firms will always make zero economic profits in the long run.

Question 5

A price-searcher firm will expand output and sales until

Accepted Answer

A) marginal revenue falls to equal the rising marginal cost. 
B) marginal revenue rises to equal the falling marginal cost. 
C) marginal revenue falls below marginal cost. 
D) marginal cost rises above marginal revenue. 
A) marginal revenue falls to equal the rising marginal cost. 
B) marginal revenue rises to equal the falling marginal cost. 
C) marginal revenue falls below marginal cost. 
D) marginal cost rises above marginal revenue.

Question 6

If a movie theater is going to gain by charging students a dollar less than other customers,

Accepted Answer

A) the demand of students must be more elastic than that of other customers. 
B) the demand of students must be less elastic than that of other customers. 
C) students must have higher incomes than other customers. 
D) other customers must enjoy movies more than students. 
A) the demand of students must be more elastic than that of other customers. 
B) the demand of students must be less elastic than that of other customers. 
C) students must have higher incomes than other customers. 
D) other customers must enjoy movies more than students.

Question 7

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 8

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 9

A competitive market economy with low barriers to entry faces an entrepreneur with

Accepted Answer

A) an environment that shields each currently successful producer from changing market conditions. 
B) the opportunity to bring new and different products and services to the market. 
C) little opportunity for wealth creation. 
D) a static business environment. 
A) an environment that shields each currently successful producer from changing market conditions. 
B) the opportunity to bring new and different products and services to the market. 
C) little opportunity for wealth creation. 
D) a static business environment.

Question 10

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 11

Which of the following is true of entrepreneurship?

Accepted Answer

A) Entrepreneurial discovery is an important source of economic growth and higher living standards. 
B) The role of the entrepreneur is not very important and that is why it is generally not included in economic models. 
C) The role of entrepreneurial discovery could be easily integrated into economic models, but nonetheless economists choose not to do so. 
D) Economic models are able to capture fully the important role of the entrepreneur in the market process. 
A) Entrepreneurial discovery is an important source of economic growth and higher living standards. 
B) The role of the entrepreneur is not very important and that is why it is generally not included in economic models. 
C) The role of entrepreneurial discovery could be easily integrated into economic models, but nonetheless economists choose not to do so. 
D) Economic models are able to capture fully the important role of the entrepreneur in the market process.

Question 12

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 13

Other economists have argued that the allocative inefficiency of competitive price searchers apparent in mechanical models is misleading. They argue that such mechanical models fail to account for

Accepted Answer

A) the entry and exit of firms in the long run, which drives economic profits to zero, thereby eliminating any short-run, allocative inefficiencies in competitive price-searcher industries. 
B) the possibility that the higher prices paid by consumers in competitive price-searcher industries are compensated by greater choice of goods or locations than would be present in an allocatively "efficient" industry. 
C) the spillover effects on the advertising industry, which would shrink substantially if competitive price searchers did not need to advertise so much. 
D) the fact that most competitive price-searcher industries are contestable markets, so competitive price searchers react to competitive pressures whether or not numerous competitors actually operate in the market. 
A) the entry and exit of firms in the long run, which drives economic profits to zero, thereby eliminating any short-run, allocative inefficiencies in competitive price-searcher industries. 
B) the possibility that the higher prices paid by consumers in competitive price-searcher industries are compensated by greater choice of goods or locations than would be present in an allocatively "efficient" industry. 
C) the spillover effects on the advertising industry, which would shrink substantially if competitive price searchers did not need to advertise so much. 
D) the fact that most competitive price-searcher industries are contestable markets, so competitive price searchers react to competitive pressures whether or not numerous competitors actually operate in the market.

Question 14

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 15

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 16

In order for effective price discrimination to occur, a seller must

Accepted Answer

A) be a pure monopolist. 
B) have large economies of scale and control over a key natural resource. 
C) face a horizontal demand curve for its product. 
D) have at least two distinguishable groups of consumers. 
A) be a pure monopolist. 
B) have large economies of scale and control over a key natural resource. 
C) face a horizontal demand curve for its product. 
D) have at least two distinguishable groups of consumers.

Question 17

The term price searcher applies to all firms that

Accepted Answer

A) face a downward-sloping demand curve. 
B) face an upward-sloping demand curve. 
C) operate in a purely competitive environment. 
D) purchase resources in a noncompetitive market. 
A) face a downward-sloping demand curve. 
B) face an upward-sloping demand curve. 
C) operate in a purely competitive environment. 
D) purchase resources in a noncompetitive market.

Question 18

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 19

Figure 10-3
  
-What is the maximum economic profit this firm depicted in Figure 10-3 will be able to earn?

Accepted Answer

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

Question 20

What type of industry is the market for grocery products? Is over-capacity present?

Accepted Answer

Though there are numerous large chains,

Exam 10: Price-Searcher Markets With Low Entry Barriers

The fact that barriers to entry are low in competitive price-searcher markets means that if current firms are making economic losses,

If Dell Computer finds that its marginal cost exceeds its marginal revenue on a model of laptop, then to maximize profit, it will

When you go to a grocery store, most candy bars of a given size sell for virtually the same price. Can we conclude that this is evidence of collusion on the part of candy bar manufacturers?

Which of the following is true for firms that produce in markets where there are no barriers to entry?

A price-searcher firm will expand output and sales until

If a movie theater is going to gain by charging students a dollar less than other customers,

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?

A market will tend to be more competitive when

A competitive market economy with low barriers to entry faces an entrepreneur with

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

Which of the following is true of entrepreneurship?

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

Other economists have argued that the allocative inefficiency of competitive price searchers apparent in mechanical models is misleading. They argue that such mechanical models fail to account for

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

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?

In order for effective price discrimination to occur, a seller must

The term price searcher applies to all firms that

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

Figure 10-3 -What is the maximum economic profit this firm depicted in Figure 10-3 will be able to earn?

What type of industry is the market for grocery products? Is over-capacity present?

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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