In a competitive price-searcher market, the firms will
A)be able to choose their price, and the entry barriers into the market will be low.
B)be able to choose their price, and the entry barriers into the market will be high.
C)have to accept the market p
A)be able to choose their price, and the entry barriers into the market will be low.
A profit-maximizing price searcher will expand output to the point where
A)total revenue equals total cost.
b)marginal revenue equals marginal cost.
c. price equals average total cost.
d. price equals marginal cost.
b)marginal revenue equals marginal cost.
In the long run, neither competitive price takers nor competitive price searchers will be able to earn economic
profits because
a. entry barriers into these markets are high, raising the costs of each firm.
b. the government will dictate moderate prices f
c. competition will force prices down to the level of per-unit production costs.
If firms in a competitive price-searcher market are currently earning economic losses, then in the long run,
a. new firms will enter the market, and the current firms will experience a decrease in demand for their products until zero economic profit is ag
c. some existing firms will exit the market, and the remaining firms will experience an
increase in demand for their products until zero economic profit is again restored.
As long as a market is contestable, then even if it has only a few sellers, the
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
a. threat of new entrants will prevent the prices from rising above the competitive level.
Entrepreneurial judgment
a. is necessary to make business decisions when no fixed decision rule can be used.
b. is fully incorporated into modern economic models of business behavior.
c. requires decision makers to follow carefully defined rules regarding
a. is necessary to make business decisions when no fixed decision rule can be used.
Compared to the outcome when the firms are price takers, competitive price-searcher markets will result in
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. les
a. a wider variety of products and higher prices.
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. P = ATC b. MR = MC c. P = MC d. MR < P
c. P = MC
The strategy underlying price discrimination is
a. to charge higher prices to customers who have good substitutes available to them and
lower prices to customers without many substitutes available to them..
b. to charge everyone the same price but limit t
c. to increase total revenue by charging higher prices to those with the most inelastic
demand for the product and lower prices to those with the most elastic demand.
If a government wanted to increase the prosperity of a nation, it could best serve this goal by
a. protecting domestic industries from international trade, thus encouraging domestic
growth.
b. regulating the way in which firms can operate.
c. reducing bar
c. reducing barriers that restrict the ability of potential competitors to enter 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?
a. When a business fails, the assets and res
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.
Which of the following is the major reason why most economists are reluctant to charge price searcher markets with allocative inefficiency?
a. Consumers value the wider variety of quality and styles in competitive price-searcher markets.
b. Advertising co
a. Consumers value the wider variety of quality and styles in competitive price-searcher markets.
Given the cost and demand conditions shown in Figure 10-5 for the competitive price-searcher firm, what is the level of output it should produce to maximize its profit?
a. 1 b. 2 c. 3 d. 4 (Look At Paper Copy)
b. 2
Given the cost and demand conditions depicted in Figure 10-5 for the competitive price-searcher firm, what is the price that the firm should charge if it wants to maximize its profit?
a. 20 b. 30 c. 40 d. 50 (Look At Paper Copy)
c. 40
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?
a. The firm will make long-run economic p
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.
Which is the best example of price discrimination?
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.
c. Airline ticket prices.
Refer to Figure 10-14. This firm will maximize profits by producing a quantity of output equal to
a. I and charging a price equal to A.
b. I and charging a price equal to C.
c. I and charging a price equal to D.
d. J and charging a price equal to B.
b. I and charging a price equal to C.
Refer to Figure 10-14. The firm is currently earning an economic
a. profit equal to the area AHFC.
b. profit equal to the area CFED.
c. loss equal to the area AHED.
d. loss equal to the area CFED.
c. loss equal to the area AHED.
Refer to Figure 10-14. In the long run, we would expect
a. more firms to enter this industry until zero economic profits are restored.
b. firms to exit this industry until zero economic profits are restored.
c. the number of firms to remain constant and e
b. firms to exit this industry until zero economic profits are restored.
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?
a. Both will sell their products at a price equal to average total cost, but only the price taker will produc
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.
Which of the following statements about price discrimination is correct?
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
a. A price discriminating firm will want to charge a higher price to the consumer group with
the more inelastic demand.
Which of the following statements is correct?
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.
d. To maximize profit, a price discriminator distinguishes groups with different demands
and charges higher prices to those with the more inelastic demand.
Entrepreneurial judgment requires
a. the ability to use perfect information about the suture to your advantage.
b. the ability to discover new approaches or solutions to complex problems.
c. the use of government regulations to prevent competition
d. that
b. the ability to discover new approaches or solutions to complex problems.
To gain from price discrimination, price searchers
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.
Refer to Figure 10-12. Panel (a) shows a profit-maximizing competitive price-searcher firm that is
a. earning zero economic profit.
c. producing its efficient scale of output.
b. likely to exit the market in the long run.
d. not maximizing its profit.
a. earning zero economic profit.
Refer to Figure 10-12. Panel (b) is consistent with a firm in a competitive price-searcher market that is
a. not in long-run equilibrium.
b. in long-run equilibrium.
c. producing its efficient scale of output.
d. earning a positive economic profit.
a. not in long-run equilibrium.
Refer to Figure 10-12. Which of the panels depicts a firm in a competitive price-searcher market earning positive economic profits?
a. Panel a
b. Panel b
c. Panel c
d. Panel d
c. Panel c
Which of the following is a major difference between a competitive price searcher and a price taker?
a. Price takers need to compete through advertising because they cannot choose their own
price, whereas competitive price searchers compete primarily thro
d. Price takers produce identical goods, whereas competitive price searchers produce goods
that are differentiated from the goods produced by their competitors.
Suppose you were asked to determine whether a firm was a price taker or a competitive price searcher by looking at a graph of the firm's cost and revenue curves. The key is that for the competitive price searcher,
a. the firm's marginal revenue curve lies
c. the firm's demand curve is downward sloping, not a horizontal line.
A competitive price-searcher market is characterized by firms
a. being able to choose their price and no barriers preventing firms from entering or leaving
the market.
b. being able to choose their price and high barriers preventing firms from entering or
a. being able to choose their price and no barriers preventing firms from entering or leaving
the market.
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
a. $1. b. $5. c. $6. d. $25.
a. $1.
The fact that barriers to entry are low in competitive price-searcher markets means that if current firms are making economic losses,
a. these losses will remain in the long run because firms will not exit the market.
b. some current firms will exit the m
b. some current firms will exit the market, causing the demand curves that face the
remaining firms to increase.
Which of the following is true when long-run equilibrium conditions are present in price-taker and competitive price-searcher markets?
a. MR = MC in both price-taker and competitive price-searcher markets
b. P = ATC in both price-taker and competitive pri
d. Both a and b, but not c are true.
A market in which the costs of entry and exit are low is called a
a.regulated market.
b.monopoly market.
c. market with high barriers to entry.
d. contestable market.
d. contestable market.
In order for a firm to be able to engage in price discrimination, it must be able to
a. identify and separate groups with different price elasticities of demand.
b. prevent resale of the product between customer groups.
c. maximize profits at the point wh
d. do both a and b, but not c.
Some economists have argued that competitive price-searcher industries are allocatively inefficient relative to price-taker industries because
a. unlike price takers, price searchers fail to produce at the point where marginal revenue is
equal to marginal
c. unlike price takers, price searchers do not produce at the minimum of their average total
cost curves.
The practice of price discrimination has which of the following effects?
a. Groups with the higher elasticity of demand will pay higher prices.
b. Groups with the lower elasticity of demand will pay higher prices.
c. With price discrimination, total outpu
b. Groups with the lower elasticity of demand will pay higher prices.