FSU Econ Calhoun Chapter 10 Questions

in the short run a price searcher wishing to maximize profits or minimize losses should produce the output that A: equates marginal cost with marginal revenue B: equates marginal cost with price C: corresponds to the lowest point on the average variable cost curve D: corresponds to the lowest point on the average total cost curve

A: equates marginal cost with marginal revenue

a price discrimination firm charges the lowest price to the group that A: has the most elastic demand B: purchases the largest quantity C: engages in the most arbitrage D: is least responsive to price changes

A: has the most elastic demand

a competitive price searcher market is best described as A: many firms with some control over price and some product differentiation B: many firms with no control over price, producing identical products C: a few firms with some control over price producing highly differentiated products D: a few firms with no control over price producing similar products E: a single firm producing all of the output for the industry with strong control over price

A: many firms with some control over price and some product differentiation

competitive price searcher markets are common in A: retail selling B: farming C: basic manufacturing D: electric power generation

A: retail relling

If a movie theater is going to gain by charging students a dollar less than other customers, A: the demand of students must be more elastic than that of other customers B: the demand of students must be less elastic than that of other customers C: students must haver high incomes than other customers D: other customers must enjoy movies more than students

A: the demand of students must be more elastic than that of other customers

suppose that competitive price searcher firms are experiencing losses. in the transition from this initial situation to a long run equilibrium A: the number of firms in the market decreases B: each existing firm experiences a decrease in demand for its product C: each firm experiences an upward shift to its marginal cost and average total cost curves D: each existing firms average total cost falls to bring economic profit back to zero

A: the number of firms in the market decreases

which of the following statements about entrepreneurs is most accurate? A: they will prosper if they undertake projects that increase the value of their resources B: they are people who extend loans to other business decision makers C: they are managers who generally work for a salary because they are unwilling to take risks D: they will prosper if they charge prices higher than their rivals

A: they will prosper if they undertake projects that increase the value of their resources

price discrimination occurs when A: firms maximize their profit by setting price qual to marginal cost B: a seller charges different prices to different consumers for the same product or service C: a seller chargers the same price to consumers for a different product or service D: a seller chargers different prices to consumers, discrimination by race or gender of the consumer

B: a seller charges different prices to different consumers for the same product or service

The free entry and exit of firms in a competitive price searcher market guarantees that A: both economic profits and economic losses can persist in the long run B: both economic profits and economic losses disappear in the long run C: economic profits but not economic losses can persist in the long run D: economic losses but not economic profits can persist in the long run

B: both economic profits and economic losses disappear in the long run

which of the following is a necessary condition for price discrimination to be profitable? A: all consumers must have an identical demand for the product B: groups of consumers with different demand elasticities must be easily distinguishable C: the market demand for the product must be highly elastic D: it must be possible for buyers to resell the product at a low cost

B: groups of consumers with different demand elasticities must be easily distinguishable

a contestable market is a market A: that is highly contested by two and only two rival firms B: in which the costs of entry and exit are low C: characterized by high profitability and government regulation D: characterized by a large number of firms ; in essence the term means the same thing as pure competition

B: in which the costs of entry and exit are low

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? 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 markets

B: low costs of entry into and exit from the market

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

B: raise the price of the product and reduce its output

Losses are important to a competitive price-searcher market (industry) because they send a message to the market participants that A: more resources should be devoted to a particular industry B: resources can rise in value if diverted away from that particular industry C: resources are allocated exactly as they should be D: the firms should charge lower prices

B: resources can rise in value if diverted away from that particular industry

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

B: shift to the right

which of the following is not a characteristic of a competitive price searcher market? A: each firm produces a differentiated product B: the entry barriers are high C: each firm faces a downward sloping demand curve D; the number of firms in the market is large

B: the entry barriers are high

even when there are only a few firms in a market, the market can still be competitive as long as barriers to entry are low. markets of this type are called A: monopolistic markets B: price taker markets C: contestable markets D: convertible markets

C: contestable markets

As new firms enter a competitive price-searcher market, profits of existing firms A: rise and product diversity in the market increases B: rise and product diversity in the market decreases C: decline and product diversity in the market increases D: decline and product diversity in the market decreases

C: decline and product diversity in the market increases

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

C: economic progress for society as a whole has normally been enhanced

An important variable that is left out of economic models is A: implicit costs B: excess profits C: entrepreneurship D: the opportunity cost of resources

C: entrepreneurship

Some economies argue that competitive price searcher markets are inefficient because 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 product the output rate that would minimize their average total costs D: barriers to entry are high

C: firms do not produce the output rate that would minimize their average total costs

Airlines generally charge travelers willing to stay over Saturday night lower fares because A: these travelers have lower incomes and therefore the airlines would like to help them B: it cost less to transport travelers willing to stay over a saturday night C: the demand of these travelers is elastic, and therefore, the lower fares generate more revenue D: the demand of these travelers is inelastic and therefore the lower fares generate more revenue for the airlines

C: the demand of these travelers is elastic, and therefore, the lower fares generate more revenue

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 least two distinguishable groups of consumers

D: have at least two distinguishable groups of consumers

which of the following variables is left out of the simple economic model of the firm? A: the marginal cost of production B: consumer tastes and preferences C: the fact that many firms actually earn profits D: the entrepreneurial decision making process

D: the entrepreneurial decision making process

price discrimination refers to a system of pricing A: based on buyers income rather than buyer demand conditions so the poor pay more then the rich B: that is always more profitable than simple "single price " pricing C: that forces customers to require more services to pay higher prices D: where consumer groups with a more elastic demand for the product are charged lower prices

D: where consumer groups with a more elastic demand for the product are charged lower prices