ECO 2023 Post Ch. 10

An important difference between the situation faced by a profit-maximizing competitive price-searcher firm in the short run and the situation faced by that same firm in the long run is that in the short run,

a.) price may exceed marginal revenue, but in the long run, price will equal marginal revenue

b.) price may exceed marginal cost, but in the long run, price will equal marginal cost

c.) price may exceed average total cost, but in the long run, price will equal average total cost

d.) there are many firms in the market, but in the long run, there are only a few firms in the market

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 no firms can exit the market

b.) current firms will eat the market, causing the demand curves that face the remaining firms to increase

c.) new firms will enter the market, causing the demand curves that face the existing firms to decrease

d.) new firms will enter the market, causing no change in the demand curves that face the existing firms in the market

Assume a competitive price-searcher firm is earning an economic profit. The marginal revenue from selling an additional unit is $30 and the marginal cost of producing that additional unit is $23. The firm should

a.) change neither it's price nor its output level

b.) reduce its price and increase its output level

c.) increase its price and reduce its output level

d.) reduce both its price and its output level

e.) increase both its price and its output level

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

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

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

In a market that is contestable, only a few sellers, the

a.) threat of new entrant will prevent 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

The traditional view of competitive price-searcher markets holds that this type of market structure is inefficient because

a.) there are too few firms to reach an efficient level of competition

b.) barriers to entry are high

c.) excessive advertising is encouraged

d.) consumers are not allowed a sufficient amount of choice in which to express their individual preferences

Which of the following about price discrimination is true?

a.) a price-discriminating seller will charge consumers with an elastic demand a lower price than consumers with an inelastic demand

b.) a firm must face a horizontal demand curve for its product in order to engage in effective price discrimination in a market

c.) price discrimination always harms consumers and helps sellers in the short run but in the long run, consumers benefit at the expense of sellers

d.) a seller must have a monopoly in order to gain from price discrimination

Why do airlines often charge students and vacationers a lower price than business travelers?

a.) it is cheaper to provide airline service to students and vacationers than to business travelers

b.) the demand of business travelers is generally more elastic than the demand of students and vacationers

c.) the demand of students and vacationers is generally more elastic than the demand of business travelers

d.) airlines prefer to deal with students and vacationers rather than business travelers

In order for effective price discrimination to occur, a seller must

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.) have at lest two distinguishable groups of consumers

Which of the following is true of entrepreneurship?

a.) entrepreneurial discovery is an important source of economic growth and higher living standards

b.) the role of the entrepreneur is not very important and that is why it is generally not included in economic models

c.) the role of entrepreneurial discovery could be easily integrated into economic models, but nonetheless economists choose not to do so

d.) economic models are able to capture fully the important role of the entrepreneur in the market process

A competitive market economy with low barriers to entry affords an entrepreneur with

a.) an environment that shields each currently successful producer from changing market conditions

b.) the opportunity to bring new and different products and services to the market

c.) little opportunity for wealth creation

d.) a static business environment

Economic analysis suggest that in a competitive market economy, when an entrepreneur has made a large profit

a.) consumer benefits must have been reduced by at least the amount of the profit

b.) other producers have lost profits of the same size

c.) economic progress for society as a whole has normally been enhanced

d.) luck or chance, rather than productive activity, has nearly always been the largest factor

Refer to quiz on canvas

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 in efficient scale of output

d.) earning a positive economic profit

Refer to quiz on canvas

Given the cost and demand conditions depicted in figure 10-5 for the competitive price-searcher firm, what is the price the firm should charge if It wants to maximize profit?

a.) 20

b.) 30

c.) 40

d.) 50

Refer to quiz on canvas

What is the maximum economic profit this firm depicted in figure 10-2 will be able to earn?

a.) zero

b.) 20

c.) 30

d.) 100