1 When the product possibilities frontier is convex, and therefore bowed in towards the origin, this suggests

a relatively small economy with limited economic options.

none of the other answers are correct.

international trade has created comparative advantage for both goods.

there exist increasing opportunity costs of production.

the factors of production are perfect substitutes for each other.

2 As a result of long run monopolistic competition, it is true that

price equals average cost.

normal profits are zero.

price equals marginal cost.

price equals marginal revenue.

3 Consumers should like monopolistic competition because

Group of answer choices

they are able to purchase the products at the lowest possible cost.

price equals marginal cost.

none of the other answers are correct.

average total cost is minimized.

there is little waste associated with advertising expenditures.

4 Assume the following market conditions for books:

Demand:Qd = 16 - 2P

Supply:Qs = 8 + 2Pand

Market Equilibrium:Qd = Qs

When the government imposes a price ceiling of $3, we should expect

Group of answer choices

a market equilibrium price = $1.

a market equilibrium price = $ 3.

none of the other answers are correct.

a surplus of books.

a shortage of books.

5 Lower prices for a good or service will increase the demand and also shift the supply curve by reducing supply.

This statement is

Group of answer choices

false.

true.

dependent upon the elasticity of demand.

6 Which statement is true?

Group of answer choices

In the most competitive of industries, the surviving firms will earn huge economic profit over the longer run.

Average revenue is the total amount the seller receives from the sale of a product in a particular time period.

Marginal cost reaches its minimum point just as marginal product reaches its minimum point as well.

Diseconomies of scale explain the downward sloping part of the long-run ATC curve.

If demand is elastic, a decrease in price will increase total revenue.

A firm's explicit costs are the opportunity costs of using the resources that it already owns to make the firm's own product rather than selling those resources to outsiders for cash.

7 We should expect the most likely shape of the demand curve for the monopolistic competitor to be

Group of answer choices

relatively steep (inelastic)

horizontal.

none of the other answers are correct.

infinitely elastic.

vertical.

8 Assume that income declines for an inferior good.Furthermore new firms enter this market.We should mostly likely expect

Group of answer choices

market prices to decrease.

increases in both supply and demand.

an overall reduced demand for this product.

reduced equilibrium production.

no effect on the amount of output being produced.

market prices to increase.

9 The most typical monopolistically competitive firm or market listed below is

Group of answer choices

airplane manufacturing.

Edmonds Community College.

the local water utility company.

the local pizza restaurant.

corn.

10 When income rises (for an inferior good) and there occurs an adverse supply shock, we should most likely expect

Group of answer choices

profits to moderately increase.

an economic shortage.

production to decline.

the price to rise.

the price to decline.

an economic surplus.

11 Is the following statement either True or False?

"Governments have their own set of shortcomings that can themselves cause substantial misallocations of resources."

Group of answer choices

True.

False

12 We should expect the supply curve of the pure monopolist to most likely be

Group of answer choices

non-existent.

perfectly inelastic.

relatively elastic.

horizontal.

13 We say that underproduction of a good (or service) exists when

Group of answer choices

its marginal benefit exceeds the marginal cost.

consumers are rational, though lack the effective demand to meet their consumption objectives.

it is a necessity for the general welfare of the population.

the market price is relatively high.

the market price is relatively low.

there exist increasing opportunity costs which prevent complete specialization.