Question 1

Which of the following is the major reason why most economists are reluctant to charge price searcher markets with allocative inefficiency?

Accepted Answer

A)   Consumers value the wider variety of quality and styles in competitive price-searcher markets.
B)   Advertising costs are typically so small that they are irrelevant.
C)   Competitive price searchers always operate that the lowest point on their average total cost curve.
D)   Competitive price searchers charge a price equal to marginal cost.E) A) and B)
F) A) and C)

Question 2

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 dE) All of the above
F) A) and B)

Question 3

What role do losses play in a competitive price-searcher market?

Accepted Answer

A)   They penalize a firm for producing a differentiated product.
B)   They signal that more resources are needed in a particular market.
C)   They show firms that barriers to entry are high.
D)   They send a message that more value would be created if the resources were used to produce other goods.E) A) and B)
F) A) and C)

Question 4

If a contestable market has only one seller, which of the following will keep the seller from producing inefficiently and charging a price that generates long-run economic profits?

Accepted Answer

A)   government regulations
B)   low costs of entry into and exit from the market
C)   substantial economies of scale that provide a competitive advantage to large firms in such markets
D)   the threat of a government takeover of the firms in these marketsE) None of the above
F) A) and B)

Question 5

Why do the airlines charge less for passengers who stay over Saturday night and purchase their tickets two weeks in advance?

Accepted Answer

The airlines are practicing a form of pr...

Question 6

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.E) A) and B)
F) A) and C)

Question 7

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 unitsE) A) and B)
F) C) and D)

Question 8

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)   $6E) A) and B)
F) A) and C)

Question 9

(I)  The entrepreneurial discovery and development of improved products and production processes is a central element of economic progress. (II)  Traditional economic models of the firm accurately capture the role of the entrepreneur.

Accepted Answer

A)   I is true; II is false.
B)   I is false; II is true.
C)   Both I and II are true.
D)   Both I and II are false.E) All of the above
F) None of the above

Question 10

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.E) All of the above
F) None of the above

Question 11

Which of the following statements is correct?

Accepted Answer

A)   Price discrimination is always more profitable than charging a single price.
B)   A price discriminator would want to charge the highest price to those customers with the most elastic demand for his product.
C)   To be successful, a price discriminator must assure that items can be resold between high- and low-price groups.
D)   To maximize profit, a price discriminator distinguishes groups with different demands and charges higher prices to those with the more inelastic demand.E) C) and D)
F) B) and C)

Question 12

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.E) A) and C)
F) B) and C)

Question 13

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.E) B) and D)
F) A) and B)

Question 14

Evaluate the following statement: "Competitive price-searcher markets are inefficient relative to purely competitive markets since prices are higher and firms don't produce an output rate that minimizes average total cost. As a result, government action should be undertaken to remedy this situation."

Accepted Answer

Competitive price-searcher markets do ha...

Question 15

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

Question 16

If a price-searcher firm can sell 4 units at a price of $6 or it can sell 5 units at a price of $5, the marginal revenue from the fifth unit is

Accepted Answer

A)   $1.
B)   $5.
C)   $6.
D)   $25.E) None of the above
F) All of the above

Question 17

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.F) B) and E)
G) A) and B)

Question 18

In the real world, when there is no decision rule that can be applied using only information that is freely available, which of the following is most needed?

Accepted Answer

A)   government direction
B)   entrepreneurial judgment
C)   protection from competition
D)   team productionE) All of the above
F) None of the above

Question 19

Whenever firms can freely enter and exit a market,

Accepted Answer

A)   firms can never earn a profit.
B)   prices will be the same for all firms in the market.
C)   products will be identical for all firms in the market.
D)   profits and losses play an important role in determining the size of the industry.E) B) and D)
F) None of the above

Question 20

If firms in a competitive price-searcher market are incurring economic losses, which of the following scenarios would best describe the change existing firms (who are able to stay in the market)  would face as the market adjusts to long-run equilibrium?

Accepted Answer

A)   An increase in demand for each firm and lower prices.
B)   A decrease in demand for each firm and lower prices.
C)   An increase in demand for each firm and higher prices.
D)   A decrease in demand for each firm and higher prices.E) A) and D)
F) All of the above

Exam 10: Price-Searcher Markets With Low Entry Barriers

Why do the airlines charge less for passengers who stay over Saturday night and purchase their tickets two weeks in advance?

Correct Answer
verified
The airlines are practicing a form of pr...
View Answer

In the real world, when there is no decision rule that can be applied using only information that is freely available, which of the following is most needed?

Correct Answer
verified

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

Correct Answer
verified

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?

Correct Answer
verified

(I) The entrepreneurial discovery and development of improved products and production processes is a central element of economic progress. (II) Traditional economic models of the firm accurately capture the role of the entrepreneur.

Correct Answer
verified

Whenever firms can freely enter and exit a market,

Correct Answer
verified

Correct Answer
verified
Competitive price-searcher markets do ha...
View Answer

Which of the following statements is correct?

Correct Answer
verified

Which is the best example of price discrimination?

Correct Answer
verified

If a price-searcher firm can sell 4 units at a price of $6 or it can sell 5 units at a price of $5, the marginal revenue from the fifth unit is

Correct Answer
verified

Which of the following is the major reason why most economists are reluctant to charge price searcher markets with allocative inefficiency?

Correct Answer
verified

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?

Correct Answer
verified

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?

Correct Answer
verified

If firms in a competitive price-searcher market are incurring economic losses, which of the following scenarios would best describe the change existing firms (who are able to stay in the market) would face as the market adjusts to long-run equilibrium?

Correct Answer
verified

What role do losses play in a competitive price-searcher market?

Correct Answer
verified

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?

Correct Answer
verified

If a contestable market has only one seller, which of the following will keep the seller from producing inefficiently and charging a price that generates long-run economic profits?

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

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

Correct Answer
verified

Exam 10: Price-Searcher Markets With Low Entry Barriers

Why do the airlines charge less for passengers who stay over Saturday night and purchase their tickets two weeks in advance?

Correct AnswerverifiedThe airlines are practicing a form of pr...View AnswerShow Answer

In the real world, when there is no decision rule that can be applied using only information that is freely available, which of the following is most needed?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedShow Answer

(I) The entrepreneurial discovery and development of improved products and production processes is a central element of economic progress. (II) Traditional economic models of the firm accurately capture the role of the entrepreneur.

Correct AnswerverifiedShow Answer

Whenever firms can freely enter and exit a market,

Correct AnswerverifiedShow Answer

Correct AnswerverifiedCompetitive price-searcher markets do ha...View AnswerShow Answer

Which of the following statements is correct?

Correct AnswerverifiedShow Answer

Which is the best example of price discrimination?

Correct AnswerverifiedShow Answer

If a price-searcher firm can sell 4 units at a price of $6 or it can sell 5 units at a price of $5, the marginal revenue from the fifth unit is

Correct AnswerverifiedShow Answer

Which of the following is the major reason why most economists are reluctant to charge price searcher markets with allocative inefficiency?

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedShow Answer

If firms in a competitive price-searcher market are incurring economic losses, which of the following scenarios would best describe the change existing firms (who are able to stay in the market) would face as the market adjusts to long-run equilibrium?

Correct AnswerverifiedShow Answer

What role do losses play in a competitive price-searcher market?

Correct AnswerverifiedShow Answer

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?

Correct AnswerverifiedShow Answer

If a contestable market has only one seller, which of the following will keep the seller from producing inefficiently and charging a price that generates long-run economic profits?

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

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

Correct AnswerverifiedShow Answer

Correct Answer
verified
The airlines are practicing a form of pr...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified
Competitive price-searcher markets do ha...
View Answer

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
verified

Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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Correct Answer
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