Question 1

The strategy underlying price discrimination is to

Accepted Answer

A)   charge higher prices to customers who have better access to substitutes.
B)   charge everyone the same price but limit the quantity they are allowed to buy.
C)   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.
D)   reduce per-unit cost to the firm by charging higher prices to those with the most inelastic demand and lower prices to those with the most elastic demand.E) A) and B)
F) None of the above

Question 2

In a competitive price-searcher market, the firms will

Accepted Answer

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 price for their product, and the entry barriers into the market will be low.
D)   have to accept the market price for their product, and the entry barriers into the market will be high.E) A) and C)
F) B) and C)

Question 3

In long-run equilibrium, output is expanded to the minimum long-run average total cost by

Accepted Answer

A)   price takers but not by competitive price searchers.
B)   competitive price searchers but not by price takers.
C)   both competitive price searchers and price takers.
D)   neither price takers nor competitive price searchers.E) All of the above
F) A) and B)

Question 4

If firms in a competitive price-searcher market are earning economic profits, which of the following scenarios would best describe the change existing firms 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 B)
F) A) and C)

Question 5

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)   4E) A) and B)
F) A) and C)

Question 6

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)   $42E) C) and D)
F) B) and D)

Question 7

Figure 10-4
 
-If the cost and demand conditions of this competitive price-searcher firm depicted in Figure 10-4 are representative of the market, what will happen in the future?

Accepted Answer

A)   Some firms will go out of business, and the market price will rise.
B)   The current market price will tend to persist into the future.
C)   New firms will enter the market, and the market price will decline.
D)   The firms in this industry will probably collude in order to increase their profitability.E) C) and D)
F) A) and C)

Question 8

The strategy underlying price discrimination is

Accepted Answer

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 the quantity they are allowed to buy.
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.
D)   to reduce per-unit cost by charging higher prices to those with the most inelastic demand and lower prices to those with the most elastic demand.E) All of the above
F) B) and C)

Question 9

If a profit-maximizing restaurant is going to increase its revenues by charging senior citizens (persons age 65 and over)  lower prices than other customers,

Accepted Answer

A)   the demand of senior citizens for the services of the restaurant must be inelastic.
B)   senior citizens must have lower incomes than other potential customers.
C)   the demand of senior citizens for the services of the restaurant must be elastic.
D)   senior citizens must have higher incomes than other potential customers.
E)   other customers must enjoy food more than senior citizens.F) B) and D)
G) C) and D)

Question 10

If a firm in a competitive price-searcher market finds that its marginal cost exceeds its marginal revenue at the current rate of output, it should

Accepted Answer

A)   raise the price of the product and expand its output.
B)   raise the price of the product and reduce its output.
C)   lower the price of the product and expand its output.
D)   lower the price of the product and reduce its output.E) B) and C)
F) C) and D)

Question 11

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

Question 12

If a price-searcher firm can sell nine units at a price of $20, or it can sell ten units at a price of $17, what is the marginal revenue of the tenth unit?

Accepted Answer

A)   -$10
B)   $10
C)   $17
D)   $20E) A) and B)
F) B) and C)

Question 13

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 firmE) B) and D)
F) A) and D)

Question 14

Figure 10-9
 
-What is the maximum economic profit this firm depicted in Figure 10-9 will be able to earn?

Accepted Answer

A)   zero profit
B)   $200 profit
C)   $400 profit
D)   $600 profitE) B) and C)
F) A) and D)

Question 15

Tombstones are produced in a competitive price-searcher market. One producer, Rolling Stones, sells 20 tombstones a week at a price of $500 each. Its average total cost is $600. From this information, we can conclude

Accepted Answer

A)   new tombstone firms will want to enter.
B)   this producer is losing $2,000 a week.
C)   this producer is making an economic profit of $400.
D)   this producer is setting MR = MC.
E)   this producer should increase production.F) B) and E)
G) None of the above

Question 16

If firms in a competitive price-searcher market are currently experiencing economic profits, then over time,

Accepted Answer

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 again restored.
B)   new firms will enter the market, and the current firms will experience an increase in demand for their products until zero economic profit is again restored.
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.
D)   some existing firms will exit the market, and the remaining firms will experience a decrease in demand for their products until zero economic profit is again restored.E) A) and D)
F) C) and D)

Question 17

When economic losses are present in a market, firms will tend to

Accepted Answer

A)   exit from the market.
B)   raise their prices until the break-even point is reached.
C)   lower their prices, regardless of cost, so they can capture more of the market.
D)   increase output.E) A) and C)
F) A) and B)

Question 18

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) B) and C)
F) C) and D)

Question 19

A profit-maximizing price searcher will expand output to the point where

Accepted Answer

A)   total revenue equals total cost.
B)   marginal revenue equals marginal cost.
C)   price equals average total cost.
D)   price equals marginal cost.E) None of the above
F) A) and D)

Question 20

An important variable that is left out of economic models is

Accepted Answer

A)   implicit costs.
B)   excess profits.
C)   entrepreneurship.
D)   the opportunity cost of resources.E) A) and B)
F) None of the above

Exam 23: Price-Searcher Markets With Low Entry Barriers

The strategy underlying price discrimination is to

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When economic losses are present in a market, firms will tend to

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If firms in a competitive price-searcher market are currently experiencing economic profits, then over time,

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Figure 10-4 -If the cost and demand conditions of this competitive price-searcher firm depicted in Figure 10-4 are representative of the market, what will happen in the future?

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The strategy underlying price discrimination is

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If a firm in a competitive price-searcher market finds that its marginal cost exceeds its marginal revenue at the current rate of output, it should

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Tombstones are produced in a competitive price-searcher market. One producer, Rolling Stones, sells 20 tombstones a week at a price of $500 each. Its average total cost is $600. From this information, we can conclude

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In long-run equilibrium, output is expanded to the minimum long-run average total cost by

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

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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?

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If firms in a competitive price-searcher market are earning economic profits, which of the following scenarios would best describe the change existing firms would face as the market adjusts to long-run equilibrium?

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Which is the best example of price discrimination?

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An important variable that is left out of economic models is

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Figure 10-9 -What is the maximum economic profit this firm depicted in Figure 10-9 will be able to earn?

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A profit-maximizing price searcher will expand output to the point where

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If a price-searcher firm can sell nine units at a price of $20, or it can sell ten units at a price of $17, what is the marginal revenue of the tenth unit?

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In a competitive price-searcher market, the firms will

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

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If a profit-maximizing restaurant is going to increase its revenues by charging senior citizens (persons age 65 and over) lower prices than other customers,

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

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