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
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,
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
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?
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.
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
When profits exist in a competitive price-searcher market,
answer
rival firms will be attracted into the market
question
Which of the following is true when long-run equilibrium conditions are present in price-taker and
competitive price-searcher markets?
competitive price-searcher markets?
answer
P = ATC in both price-taker and competitive price-searcher markets.
question
Losses are important to a competitive price-searcher market (industry) because they send a message to the
market participants that
market participants that
answer
resources can rise in value if diverted away from that particular industry.
question
Many small U.S. cities are served by only one or two airlines. If a price increase in these markets allows other
airlines to quickly and easily enter the market and compete, economists would call these markets
airlines to quickly and easily enter the market and compete, economists would call these markets
answer
contestable markets.
question
If a market is contestable, the market will be characterized by
answer
minimum-cost production methods and a competitive (normal) profit rate.
question
To the extent that competitive price searchers fail to expand output to the minimum per-unit cost rate, many
economists believe that this high cost is merely a premium that must be paid for.
economists believe that this high cost is merely a premium that must be paid for.
answer
product variety and convenience
question
Which of the following conditions is most essential if a firm is going to earn long-run economic profits?
answer
restrictions that limit the entry of potential competitors into the industry
question
The strategy underlying price discrimination is to
answer
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.
for the product and lower prices to those with the most elastic demand.
question
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,
answer
the demand of senior citizens for the services of the restaurant must be elastic.
question
Why do airlines often charge students and vacationers a lower price than business travelers?
answer
The demand of students and vacationers is generally more elastic than the demand of
business travelers.
business travelers.
question
Airfares are generally cheaper if they include a Saturday night stay at the destination. This is because
answer
business travelers are less likely than leisure travelers to be willing to stay Saturday night
away from home, and business travelers will generally have more inelastic demand for air
travel
away from home, and business travelers will generally have more inelastic demand for air
travel
question
What price should a competitive price-searcher firm with the cost and demand conditions depicted in Figure 10-4 charge if it wants to maximize its profit?
answer
$20
question
What is the maximum economic profit this firm depicted in Figure 10-4 will be able to earn?
answer
$200 loss
question
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?
representative of the market, what will happen in the future?
answer
Some firms will go out of business, and the market price will rise.
question
What price should a competitive price-searcher firm charge with the cost and demand conditions depicted in Figure 10-9 if it wants to maximize its profit?
answer
$24
question
What is the maximum economic profit this firm depicted in Figure 10-9 will be able to earn?
answer
zero profit
question
Given the cost and demand conditions depicted in Figure 10-10 for the competitive price-searcher firm, what is the price that the firm should charge if it wants to maximize its profit?
answer
40
question
Refer to Figure 10-12. Panel (a) shows a profit-maximizing competitive price-searcher firm that is
answer
earning zero economic profit.
question
Refer to Figure 10-12. Panel (b) is consistent with a firm in a competitive price-searcher market that is
answer
not in long-run equilibrium.
question
Refer to Figure 10-12. Which of the panels depicts a firm in a competitive price-searcher market earning
positive economic profits?
positive economic profits?
answer
Panel c
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