Price Searcher Markets with Low Entry Barriers

question

In a competitive price-searcher market, the firms will

answer

be able to choose their price, and the entry barriers into the market will be low

question

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

answer

marginal revenue equals marginal cost

question

In the long run, neither competitive price takers nor competitive price searchers will be able to earn economic
profits because

answer

competition will force prices down to the level of per-unit production costs

question

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

answer

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.

question

As long as a market is contestable, then even if it has only a few sellers, the

answer

threat of new entrants will prevent the prices from rising above the competitive level.

question

Entrepreneurial judgment

answer

is necessary to make business decisions when no fixed decision rule can be used.

question

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

answer

a wider variety of products and higher prices.

question

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?

answer

P = MC

question

The strategy underlying price discrimination is

answer

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.

question

If a government wanted to increase the prosperity of a nation, it could best serve this goal by

answer

reducing barriers that restrict the ability of potential competitors to enter markets.

question

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?

answer

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

question

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

answer

Consumers value the wider variety of quality and styles in competitive price-searcher
markets.

question

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?

answer

question

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?

answer

The firm will face competition from new entrants into the industry, causing this firm's
demand to decline until zero economic profits are restored.

question

Which is the best example of price discrimination

answer

Airline ticket prices.

question

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?

answer

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.

question

Which of the following statements about price discrimination is correct?

answer

A price discriminating firm will want to charge a higher price to the consumer group with
the more inelastic demand

question

Which of the following statements is correct?

answer

To maximize profit, a price discriminator distinguishes groups with different demands
and charges higher prices to those with the more inelastic demand.

question

Entrepreneurial judgment requires

answer

the ability to discover new approaches or solutions to complex problems.

question

To gain from price discrimination, price searchers

answer

must charge a higher price to those with a more inelastic demand.

question

Which of the following is a major difference between a competitive price searcher and a price taker?

answer

Price takers produce identical goods, whereas competitive price searchers produce goods
that are differentiated from the goods produced by their competitors

question

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 above and to the right of the demand curve, not
below and to the left.

answer

the firm's demand curve is downward sloping, not a horizontal line

question

A competitive price-searcher market is characterized by firms

answer

being able to choose their price and no barriers preventing firms from entering or leaving
the market

question

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

answer

question

The fact that barriers to entry are low in competitive price-searcher markets means that if current firms are
making economic losses,

answer

some current firms will exit the market, causing the demand curves that face the
remaining firms to increase

question

Which of the following is true when long-run equilibrium conditions are present in price-taker and
competitive price-searcher markets?

answer

MR = MC in both price-taker and competitive price-searcher markets
b. P = ATC in both price-taker and competitive price-searcher markets

question

A market in which the costs of entry and exit are low is called a

answer

contestable market.

question

In order for a firm to be able to engage in price discrimination, it must be able to

answer

identify and separate groups with different price elasticities of demand.
b. prevent resale of the product between customer groups.

question

Some economists have argued that competitive price-searcher industries are allocatively inefficient relative to
price-taker industries because

answer

unlike price takers, price searchers do not produce at the minimum of their average total
cost curves

question

The practice of price discrimination has which of the following effects?

answer

Groups with the lower elasticity of demand will pay higher prices

1 of 30

question

In a competitive price-searcher market, the firms will

answer

be able to choose their price, and the entry barriers into the market will be low

question

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

answer

marginal revenue equals marginal cost

question

In the long run, neither competitive price takers nor competitive price searchers will be able to earn economic
profits because

answer

competition will force prices down to the level of per-unit production costs

question

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

answer

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.

question

As long as a market is contestable, then even if it has only a few sellers, the

answer

threat of new entrants will prevent the prices from rising above the competitive level.

question

Entrepreneurial judgment

answer

is necessary to make business decisions when no fixed decision rule can be used.

question

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

answer

a wider variety of products and higher prices.

question

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?

answer

P = MC

question

The strategy underlying price discrimination is

answer

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.

question

If a government wanted to increase the prosperity of a nation, it could best serve this goal by

answer

reducing barriers that restrict the ability of potential competitors to enter markets.

question

answer

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

question

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

answer

Consumers value the wider variety of quality and styles in competitive price-searcher
markets.

question

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?

answer

question

answer

The firm will face competition from new entrants into the industry, causing this firm's
demand to decline until zero economic profits are restored.

question

Which is the best example of price discrimination

answer

Airline ticket prices.

question

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?

answer

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.

question

Which of the following statements about price discrimination is correct?

answer

A price discriminating firm will want to charge a higher price to the consumer group with
the more inelastic demand

question

Which of the following statements is correct?

answer

To maximize profit, a price discriminator distinguishes groups with different demands
and charges higher prices to those with the more inelastic demand.

question

Entrepreneurial judgment requires

answer

the ability to discover new approaches or solutions to complex problems.

question

To gain from price discrimination, price searchers

answer

must charge a higher price to those with a more inelastic demand.

question

Which of the following is a major difference between a competitive price searcher and a price taker?

answer

Price takers produce identical goods, whereas competitive price searchers produce goods
that are differentiated from the goods produced by their competitors

question

answer

the firm's demand curve is downward sloping, not a horizontal line

question

A competitive price-searcher market is characterized by firms

answer

being able to choose their price and no barriers preventing firms from entering or leaving
the market

question

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

answer

question

The fact that barriers to entry are low in competitive price-searcher markets means that if current firms are
making economic losses,

answer

some current firms will exit the market, causing the demand curves that face the
remaining firms to increase

question

Which of the following is true when long-run equilibrium conditions are present in price-taker and
competitive price-searcher markets?

answer

MR = MC in both price-taker and competitive price-searcher markets
b. P = ATC in both price-taker and competitive price-searcher markets

question

A market in which the costs of entry and exit are low is called a

answer

contestable market.

question

In order for a firm to be able to engage in price discrimination, it must be able to

answer

identify and separate groups with different price elasticities of demand.
b. prevent resale of the product between customer groups.

question

Some economists have argued that competitive price-searcher industries are allocatively inefficient relative to
price-taker industries because

answer

unlike price takers, price searchers do not produce at the minimum of their average total
cost curves

question

The practice of price discrimination has which of the following effects?

answer

Groups with the lower elasticity of demand will pay higher prices

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