Question 1

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 2

Which of the following most closely approximates the conditions of a competitive price-searcher market?

Accepted Answer

A) the market for Grade A eggs, which is characterized by a large number of firms producing a homogeneous product 
B) the restaurant industry, which is characterized by firms producing a differentiated product in a market with low entry barriers 
C) local cable television service, where a licensed supplier competes with firms offering satellite service 
D) the market for jumbo aircraft, where one major domestic firm competes with one major foreign firm 
A) the market for Grade A eggs, which is characterized by a large number of firms producing a homogeneous product 
B) the restaurant industry, which is characterized by firms producing a differentiated product in a market with low entry barriers 
C) local cable television service, where a licensed supplier competes with firms offering satellite service 
D) the market for jumbo aircraft, where one major domestic firm competes with one major foreign firm

Question 3

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 earning a positive profit?

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 4

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 5

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 6

If marginal cost exceeds marginal revenue, a profit-maximizing firm should

Accepted Answer

A) expand output until marginal cost equals marginal revenue. 
B) expand output until marginal revenue equals price. 
C) reduce output until marginal cost equals marginal revenue. 
D) reduce output until price equals average total cost. 
A) expand output until marginal cost equals marginal revenue. 
B) expand output until marginal revenue equals price. 
C) reduce output until marginal cost equals marginal revenue. 
D) reduce output until price equals average total cost.

Question 7

To gain from price discrimination, price searchers

Accepted Answer

A) must charge a higher price to those with a more inelastic demand. 
B) must be pure monopolists. 
C) must have small economies of scale 
D) must have access to widely available natural resources. 
A) must charge a higher price to those with a more inelastic demand. 
B) must be pure monopolists. 
C) must have small economies of scale 
D) must have access to widely available natural resources.

Question 8

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) be able to prevent consumers from reselling the product to other 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) be able to prevent consumers from reselling the product to other consumers.

Question 9

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 10

Which of the following is true when long-run equilibrium conditions are present in price-taker and competitive price-searcher markets?

Accepted Answer

A) MR = MC in both price-taker and competitive price-searcher markets 
B) P = ATC in both price-taker and competitive price-searcher markets 
C) P = MC in both price-taker and competitive price-searcher markets 
D) Both a and b, but not c are true. 
A) MR = MC in both price-taker and competitive price-searcher markets 
B) P = ATC in both price-taker and competitive price-searcher markets 
C) P = MC in both price-taker and competitive price-searcher markets 
D) Both a and b, but not c are true.

Question 11

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 12

Which of the following is a characteristic of a contestable market?

Accepted Answer

A) long-run economic profit 
B) many firms that are small relative to the market 
C) high costs for entry and exit 
D) minimum-cost production methods 
A) long-run economic profit 
B) many firms that are small relative to the market 
C) high costs for entry and exit 
D) minimum-cost production methods

Question 13

Suppose a price-searcher firm faces the following demand curve data for its product.  
What is the firm's marginal revenue from selling the seventh unit?

Accepted Answer

A) $0 
B) $2 
C) $7 
D) $42 
A) $0 
B) $2 
C) $7 
D) $42

Question 14

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 15

Figure 10-4
  
-What is the maximum economic profit this firm depicted in Figure 10-4 will be able to earn?

Accepted Answer

A) $200 loss 
B) zero profit 
C) $250 profit 
D) $700 profit 
A) $200 loss 
B) zero profit 
C) $250 profit 
D) $700 profit

Question 16

The market for home-delivered pizza is extremely competitive in Introville, Utah, and prices continue to fall. Assume they have fallen so low that the 20 pizza delivery firms are all suffering economic losses. What will likely happen in the long run?

Accepted Answer

With all firms earning economic losses,

Question 17

Even though firms in competitive price-searcher markets do not produce at minimum ATC, competitive price-searcher markets may still be consistent with economic efficiency because

Accepted Answer

A) strict government regulations force the firms in these markets to keep their costs low. 
B) they provide consumers with a greater diversity of products. 
C) they encourage more advertising in both price-searcher and price-taker markets. 
D) special legal protections for price searchers make it possible for them to more efficiently use resources. 
A) strict government regulations force the firms in these markets to keep their costs low. 
B) they provide consumers with a greater diversity of products. 
C) they encourage more advertising in both price-searcher and price-taker markets. 
D) special legal protections for price searchers make it possible for them to more efficiently use resources.

Question 18

Price discrimination occurs when

Accepted Answer

A) firms maximize their profit by setting price equal to marginal cost. 
B) a seller charges different prices to different consumers for the same product or service. 
C) a seller charges the same price to consumers for a different product or service. 
D) a seller charges different prices to consumers, discriminating by race or gender of the consumer. 
A) firms maximize their profit by setting price equal to marginal cost. 
B) a seller charges different prices to different consumers for the same product or service. 
C) a seller charges the same price to consumers for a different product or service. 
D) a seller charges different prices to consumers, discriminating by race or gender of the consumer.

Question 19

Which of the following would be most likely if firms in a competitive price-searcher market were earning economic profit?

Accepted Answer

A) Production inefficiencies would persist until the profit was eliminated. 
B) Firms would decrease their rate of output in the short run, causing a decline in profitability in the market. 
C) New firms would enter the market, resulting in fewer sales by existing firms. 
D) All firms in the market would continue to produce at their current levels and continue to charge the same price. 
A) Production inefficiencies would persist until the profit was eliminated. 
B) Firms would decrease their rate of output in the short run, causing a decline in profitability in the market. 
C) New firms would enter the market, resulting in fewer sales by existing firms. 
D) All firms in the market would continue to produce at their current levels and continue to charge the same price.

Question 20

Given the following price and output schedule, how many units should this price-searcher firm produce in order to maximize profits?

Accepted Answer

A) 1 
B) 2 
C) 3 
D) 4 
A) 1 
B) 2 
C) 3 
D) 4

Exam 10: Price-Searcher Markets With Low Entry Barriers

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

Which of the following most closely approximates the conditions of a competitive price-searcher market?

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 earning a positive profit?

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

Which is the best example of price discrimination?

If marginal cost exceeds marginal revenue, a profit-maximizing firm should

To gain from price discrimination, price searchers

For effective price discrimination to occur, a seller must

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

Which of the following is true when long-run equilibrium conditions are present in price-taker and competitive price-searcher markets?

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?

Which of the following is a characteristic of a contestable market?

Suppose a price-searcher firm faces the following demand curve data for its product. What is the firm's marginal revenue from selling the seventh unit?

Firms that are price searchers

Figure 10-4 -What is the maximum economic profit this firm depicted in Figure 10-4 will be able to earn?

The market for home-delivered pizza is extremely competitive in Introville, Utah, and prices continue to fall. Assume they have fallen so low that the 20 pizza delivery firms are all suffering economic losses. What will likely happen in the long run?

Even though firms in competitive price-searcher markets do not produce at minimum ATC, competitive price-searcher markets may still be consistent with economic efficiency because

Price discrimination occurs when

Which of the following would be most likely if firms in a competitive price-searcher market were earning economic profit?

Given the following price and output schedule, how many units should this price-searcher firm produce in order to maximize profits?

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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