Question 1

Renewable resources are those that

Accepted Answer

A)   can be renewed, but only with the use of energy resources.
B)   are constantly being renewed by nature.
C)   will inevitably run out over time, like all other resources.
D)   are not really scarce, because they are constantly renewed naturally.E) C) and D)
F) None of the above

Question 2

When natural resources are not traded, or where markets are not allowed to function as well as they can under a system of well-defined property rights, the problems of ____ and ____ are common. (Fill in the blanks)

Accepted Answer

A)   higher taxes; increased regulation
B)   waste; scarcity
C)   inflation; unemployment
D)   slow growth; fluctuating currency valuesE) A) and D)
F) A) and B)

Question 3

How are the economic forces that apply to renewable resources different than those that apply to non-renewable resources?

Accepted Answer

A)   Non-renewable resources must be protected by government policies to prevent depletion.
B)   Non-renewable resources do not have any substitutes so the economic forces are different than those for renewable resources..
C)   Both renewable and non-renewable resources may become scarcer over time so the economic forces at work are similar.
D)   Renewable resources are not subject to the laws of economics since the scarcity condition no longer holds.E) A) and D)
F) A) and C)

Question 4

Water, when it is not tradeable among current and potential users, is often kept that way

Accepted Answer

A)   by governments demanding tight control over who gets the water.
B)   by nature, as water cannot be easily moved from place to place in large quantities.
C)   to protect fish and other wildlife, rather than for any other reason.
D)   by monopoly owners in the private sector.E) None of the above
F) A) and C)

Question 5

When a new firm enters a competitive price-searcher market, the demand curves faced by all existing firms in that market will

Accepted Answer

A)   shift to the left.
B)   shift to the right.
C)   shift in a direction that is unpredictable without further information.
D)   remain unchanged. It is the supply curve that will shift.E) A) and D)
F) A) and C)

Question 6

Which of the following statements about price discrimination is correct?

Accepted Answer

A)   A price discriminating firm will want to charge a higher price to the consumer group with the more inelastic demand.
B)   A firm will always be able to increase its profit by price discriminating rather than charging the same price to all customers.
C)   Price discrimination will be most effective when buyers can easily resell the product amongst themselves.
D)   Each consumer will pay a higher price when a firm is a price discriminator than would be the case if all customers were charged the same price.E) B) and C)
F) A) and D)

Question 7

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.E) C) and D)
F) B) and C)

Question 8

Figure 10-12    
-Refer to Figure 10-12. Panel (b)  is consistent with a firm in a competitive price-searcher market that is

Accepted Answer

A)   not in long-run equilibrium.
B)   in long-run equilibrium.
C)   producing its efficient scale of output.
D)   earning a positive economic profit.E) None of the above
F) All of the above

Question 9

Economic theory indicates that the amount consumed of a natural resource depends on

Accepted Answer

A)   the price of the resource.
B)   consumer income.
C)   the price of substitute resources.
D)   all of the above.E) All of the above
F) A) and C)

Question 10

When a firm exits a competitive price-searcher market, the individual demand curves faced by all remaining firms in that market will

Accepted Answer

A)   shift in a direction that is unpredictable without further information.
B)   shift to the right.
C)   shift to the left.
D)   remain unchanged. It is the supply curve that will shift.E) A) and B)
F) A) and C)

Question 11

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.E) C) and D)
F) B) and D)

Question 12

Which of the following is a positive side effect of business start-ups and the business failures that often follow?

Accepted Answer

A)   The process makes it possible to try out numerous new ideas, and some of them will substantially improve our lives.
B)   The process increases total employment, and leads to a lower rate of unemployment.
C)   The process generates additional revenue for the government, which will then be used to produce goods and services that people value.
D)   This is a trick question. There are no positive side effects of business failures.E) None of the above
F) A) and C)

Question 13

Which of the following is true for a price-searcher firm?

Accepted Answer

A)   Its marginal revenue curve will lie below its demand curve.
B)   Its marginal revenue curve will lie above its demand curve.
C)   Its marginal revenue curve is equal to its demand curve.
D)   Its marginal revenue curve is horizontal at the market equilibrium price.E) None of the above
F) A) and D)

Question 14

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

Accepted Answer

A)   long-run economic profits.
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)   the entry of additional firms into the market, which increases the demand for the product of each firm in the market.E) A) and D)
F) A) and B)

Question 15

As long as a market is contestable, then even if it has only a few sellers, the

Accepted Answer

A)   threat of new entrants will prevent the prices from rising above the competitive level.
B)   producers will be able to charge prices that are high enough to produce long-run economic profits.
C)   producers will not face new competition because the barriers to entry are high.
D)   market will never be expected to come close to the competitive result.E) All of the above
F) A) and C)

Question 16

Suppose that competitive price-searcher firms are earning positive profits. In the transition from this initial situation to a long-run equilibrium,

Accepted Answer

A)   the number of firms in the market decreases.
B)   each existing firm experiences a decrease in demand for its product.
C)   each existing firm experiences a rightward shift of its marginal revenue curve.
D)   each existing firm experiences an upward shift in its average total cost curve.E) B) and C)
F) B) and D)

Question 17

When an entrepreneur introduces a new improved product that is highly valued relative to cost

Accepted Answer

A)   consumers will be worse off.
B)   the demand for the products that are good substitutes for the new product will increase.
C)   some of the existing products will become obsolete and businesses producing those products will fail.
D)   total employment will decline if there are business failures.E) B) and D)
F) A) and B)

Question 18

Use the figure to answer the following question(s) .
Figure 10-5 
-Given that the short-run cost and demand conditions shown in Figure 10-5 for the competitive price-searcher firm are representative for all firms in the industry, what will happen in this industry in the long run?

Accepted Answer

A)   The firm will make long-run economic profits.
B)   The firm will face competition from new entrants into the industry, causing this firm's demand to decline until zero economic profits are restored.
C)   The firm will face competition from new entrants into the industry, but since lower prices will increase total sales, profit will stay the same as that shown in the figure.
D)   The firm will see some of its competitors exit from the industry, causing this firm's demand to increase until zero economic profits are restored.E) B) and C)
F) All of the above

Question 19

Sellers in competitive price-searcher markets

Accepted Answer

A)   face competition both from existing firms and potential new entrants.
B)   face competition from existing firms but not from potential new entrants.
C)   face competition only from potential new entrants and only in the long run.
D)   can compete only by product quality since product prices are set by market forces.E) All of the above
F) A) and B)

Question 20

Use the figure to answer the following question(s) .
Figure 10-3 
-What price should a competitive price searcher firm with the cost and demand conditions depicted in Figure 10-3 charge if it wants to maximize its profit?

Accepted Answer

A)   $6
B)   $8
C)   $10
D)   $12E) A) and B)
F) None of the above

Exam 10: Price-Searcher Markets With Low Entry Barriers

Which of the following statements about price discrimination is correct?

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Renewable resources are those that

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When an entrepreneur introduces a new improved product that is highly valued relative to cost

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Which of the following is a positive side effect of business start-ups and the business failures that often follow?

Correct AnswerverifiedShow Answer

As long as a market is contestable, then even if it has only a few sellers, the

Correct AnswerverifiedShow Answer

Which of the following is true for a price-searcher firm?

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Suppose that competitive price-searcher firms are earning positive profits. In the transition from this initial situation to a long-run equilibrium,

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Use the figure to answer the following question(s) . Figure 10-3 -What price should a competitive price searcher firm with the cost and demand conditions depicted in Figure 10-3 charge if it wants to maximize its profit?

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How are the economic forces that apply to renewable resources different than those that apply to non-renewable resources?

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When a firm exits a competitive price-searcher market, the individual demand curves faced by all remaining firms in that market will

Correct AnswerverifiedShow Answer

Use the figure to answer the following question(s) . Figure 10-5 -Given that the short-run cost and demand conditions shown in Figure 10-5 for the competitive price-searcher firm are representative for all firms in the industry, what will happen in this industry in the long run?

Correct AnswerverifiedShow Answer

When a new firm enters a competitive price-searcher market, the demand curves faced by all existing firms in that market will

Correct AnswerverifiedShow Answer

Figure 10-12 -Refer to Figure 10-12. Panel (b) is consistent with a firm in a competitive price-searcher market that is

Correct AnswerverifiedShow Answer

Economic theory indicates that the amount consumed of a natural resource depends on

Correct AnswerverifiedShow Answer

Sellers in competitive price-searcher markets

Correct AnswerverifiedShow Answer

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?

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When natural resources are not traded, or where markets are not allowed to function as well as they can under a system of well-defined property rights, the problems of ____ and ____ are common. (Fill in the blanks)

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Water, when it is not tradeable among current and potential users, is often kept that way

Correct AnswerverifiedShow Answer

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When natural resources are not traded, or where markets are not allowed to function as well as they can under a system of well-defined property rights, the problems of and are common. (Fill in the blanks)

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