AP Micro Final Exam

The graph below represents a profit maximizing monopoly. Based on the graph, what are the total costs of this firm at the profit maximizing output?

$100

The graph below represents a profit maximizing monopoly. Based on the graph above, what is the total profit of this firm?

$60

Unit elastic

A bookstore raises the price of its coffee by 10%, and the spending by its customers (TR) doesn't change. This indicates that, in this price range, demand for this store's coffee is...

Assuming the same cost and demand data, which of the following statements regarding monopolies is true?

A discriminating monopolist earns greater profits than a non discriminating monopolist because when it lowers its price to increase sales, it does not sacrifice revenue on previous units.

Market price is below AVC

A perfectly competitive firm should always shut down in the short-run if which of the followingis true?

TR>TVC

A perfectly competitive firm will operate in the short run only if

Market price will decrease, and profits will decrease

A pharmaceutical company owns a patent for an antibiotic, and it is currently earning positive economic profits from sales of the medication. Following the expiration of the patent, what is thw most likely impact on the market price and the company's profit for the medication?

The graph below represents a non discriminating monopoly. Based on the above graph the monopoly has

A profit of P2P3ab

As more workers are added to work on a project that has a fixed amount of capital resources for them to work on, beyond some point the resulting extra output will begin to decline.

A unique short-run problem in the production of a particular good is the Law of Diminishing Marginal Returns. Which of the following statements best explains this phenomenon?

The graph below represents a profit maximizing monopoly. Which area on the graph represents the dead weight loss?

ABC

Expectations concerning price

All of the following are determinants of elasticy of demand except...

Fixed factory size

All of the following can be used to explain why a firm experiences economies of scale except?

Which of the following of legal methods may not be used to create barriers to entering a market?

Anti-trust laws

higher, and its output would be lower

As compared to a perfectly competitive industry with the same costs, the equilibrium price for a monopoly would be

Are inferior goods

As income increases from $10,000 to $20,000, the quantity of hot dogs demanded decreases from 100 to 20. This means that hot dogs are

increasing its output

Assuming it should produce, if a perfectly competitive firm is currently producing output such that the price of the last unit produced is $15 and the marginal cost of the last unit is $10, that firm could increase its profit by

P2 and Q2; where MC=AC

Based on the above graph, the price and quantity of this firm in the long-run would be

2 units of capital goods

Based on the above graph, what would be the opportunity cost of moving from Point A to T?

Blue jeans are a normal good and incomes increase, and the price of cotton, used to produce denim increases.

Based on the above graph, which of the following scenarios could result in a change in equilibrium price from P1 to P2?

Industry supply would increase; price would decrease; quantity would increase

Based on the above graph, which reflects a constant-cost industry, what would be the expected long-run changes in the industry?

There would be a shortage of 100 tickets

Based on the data in the graph above, what would happen if the government set a maximum price of $15 for football tickets

40; D=S

Based on the graph above, the equilibrium quantity in the market would be

P4 and Q4; S2=D1 (on supply is shifted)

Based on the graph, if P1 and Q1 represent the initial equilibrium price and quantity, what would be the new equilibrium price and quantity of coffee if a poor growing season for coffee results in a substantially higher price for coffee beans

$150

Based on the graph, what is the amount of total producer and consumer surplus?

1 sausage for between 5/4 to 4 olives.

Based on the graph, which of the following terms of trade would be advantageous for both countries?

Increase the time he plays video games to 2 hours so that his marginal costs and benefits will be equal.

Based on the information in the graph above which represents John's marginal benefits and marginal costs from playing video games, if John is currently playing video games for 1 hr a day, he should...

The graph below represents a non discriminating monopoly. Over which price range is the monopolies demand curve elastic?

Between P3 and P5

III and IV only

Consider the following market structure types: I. Perfect competition II. Monopolistic competition III. Oligopoly IV. Monopoly In which of the market structures above are long-run economic profits possible?

A shift upwards of the AVC, ATC, and MC

Each year you give the workers of your company an increase in wages. This would cause?

The cross-elasticity coefficient for eggs and cereal is 1.8

Eggs and bacon are complements, and eggs and cereal are substitutes. Which of the following could be true based on this information?

Ownership of resources

Entry barriers that lead to the creation of monopolies include

Which of the following statements correctly identify necessary conditions for a natural monopoly? I. One firm owns the entire supply of a critical resource II. One firm can supply the entire market III. One firm experiences economies of scale in its average cost in the long run

II and III

Its TFC

If a firm shuts down in the short-run, its losses will equal

The MSB will exceed the MPB

If positive externalities exist in a perfectly competitive market with no government intervention, which of the following is true?

MC>MB

If resources are overallocated to production of a good, this means that...

Perfectly inelastic

If the coefficient for elasticity of demand is zero, the demand is...

Increase by 40%

If the elasticity of demand coefficient for sunglasses is .25, which of the following price changes would decrease the quantity demanded by 10%?

24 pounds of strawberries; current - new

If the farmer is currently producing at possibility A, what is the opportunity cost of 45 peaches?

A shortage of 900 rental units

If the government passed an ordinance establishing a maximum rent of $315 in the market represented in the above graph, there would be

Goods with perfectly inelastic demand

If the government wants to increase revenue by imposing a per unit excise tax, which of the following types of good would allow it to best achieve that objective?

Increase from Q1 to Q2

If the non-discriminating monopoly represented in the graph above is able to begin perfectly price-discriminating, its output will

MSB would exceed MSC at equilibrium

If the production of donuts creates a pleasant smell that benefits those who live near the donut factory, even though they are not involved in the production or purchase of the donuts. Assuming donuts are produced and sold in a perfectly competitive market, which of the following could be true?

The demand for the tickets is elastic

If total gate receipts for sales of concert tickets decrease when the price is increased,

Price floors for agricultural goods lead to surpluses in these markets.

In market economic systems, prices ration scarce goods and services. All of the following describe examples of prices serving in this rationing function in a market system except...

Pafd

In the above graph of a perfectly-competitive firm suffering economic losses, which area represents the firm's total losses?

P1

In the above graph, which of the following prices would lead the firm to a shutdown in the short-run?

(A) consumer spending and (B) resources

In the circular flow model, which economists use to represent market economic systems, which of the following represent the clockwise flows into (A) and out of (B) the product market as shown into the diagram below?

The firm's total costs are increasing.

In the long run, a firm increases its inputs by 15%, and its outputs increase by 25%. Which of the following is true?

The firm sells a unique product with no close substitutes

In which of the following situations is a firm likely to have the greatest market power?

It is earning normal profits in the long-run

In which of the following situations will a perfectly competitive firm produce the productively efficient output?

In the long run, typical non-discriminating monopolies are

Neither allocatively or productively efficient

In the above graph for a perfectly price discriminating monopoly, which area represents profits?

P0P4ce

The graph below represents a non discriminating monopoly. At what price on the above graph is demand unit elastic?

P3

The grass below represent a non discriminating monopoly. What would the profit maximizing price and output be for this firm?

P4 and Q1

The graph below represents a profit maximizing monopoly. Based on the above graph, the profit maximizing price, socially optimal price and fair return price are

P4, P1, and P3 respectively

The craft below represents a non discriminating monopoly. What area on the above graph represents this consumer surplus in this market?

P4P5d

Which of the following is true at the profit maximizing output for a perfectly competitive firm but not for a monopoly, if both are earning economic profits?

P=MC

Refer to the above diagram. Suppose the government decides that the enterprise depicted above it's a natural monopoly, and therefore needs to be regulated. If the government seeks to ensure that the firm doesn't know better than break even, it will set the firm's price at...

Pf; fair return price

Refer to the above diagram. If the government seeks to achieve the most efficient allocation of resources till the production of this natural monopoly's product, it will set a price of

Pr; socially optimal price

$6; change in TR/change in Q

Refer to the above date for Glenn's G-loves, a monopolistic novelty shop that sells unusual and rare hand wear items. In calculation MR, Glenn finds that for selling a sixth unit of output,

It falls, leaving all firms at a break-even point

Refer to the above graph. Based on what you can tell from the graph, what should happen to price (MR) in the long run?

Earning a profit equal to the area PABC

Refer to the graph above. The firm shown is currently

The MR curve will reside below the D curve because any reduction in price applies to all units sold

Regardless of whether a firm is a monopoly or a member of an oligopolistic or monopolistically competitive industry, a graph of any non-discriminating, imperfectly competitive firm will have which of the following characteristics?

Which of the following statements regarding the allocation of resources is not true?

Resources are efficiently allocated when positive externalities exist in a perfectly competitive market

Who owns the factors of production, and the methods used to coordinate economic activity.

Shane is asked by his economics teacher to explain differences between Command and Free Market systems. Shane correctly answers that the two basic differences are:

.75

The computer market includes two manufacturers, Peach and Kiwi. When the price in the market is 100, Peach will produce 100 computers and Kiwi will produce 200 computers. When the price rises to $200, Peach will produce 200, and Kiwi will produce 300. When the market price increases from $100 to $200, what is the market elasticity of supply using the midpoint formula?

They are complements

The cross-elasticity of demand coefficient for lettuce and tomatoes is 2.4. Based on this info, what is the relationship between these two goods?

$30

The firm below represents short-run cost data for a perfectly competitive firm. Based on the table above, what is the marginal cost of the 5th output?

$45; ATC= (TVC+TFC)/2

The firm below represents short-run cost data for a perfectly competitive firm. What is the firm's ATC of producing 2 units of output?

4

The firm below represents short-run cost data for a perfectly competitive firm. What would this firm's short-run output be if the price in this market is currently $28?

If the government forces this natural monopoly to produce at quantity Qr

The firm will continue to operate at a loss, while the government subsidizes the firm to allow it to break even

The graph below represents an unregulated, profit maximizing monopoly. Which of the following is true based on the above graph?

The firm's total profit is represented by area 0P1AQ3..

II, III, and IV

The following are the four different types of market structures for product markets: I. Perfect competition II. Monopolistic competition III. Oligopoly IV. Monopoly In which of the above market structures would a firm be a price maker (searcher)?

$80; TC/Q

The graph below represents a perfectly-competitive firm that is currently earning positive economic profits. What is the firm's total fixed costs?

$2

The graph below represents a perfectly-competitive firm that is currently earning positive economic profits. What is the per unit profit of the firm?

$320

The graph below represents a perfectly-competitive firm that is currently earning positive economic profits. What is the total costs?

$80

The graph below represents a perfectly-competitive firm that is currently earning positive economic profits. What is the total profit of the firm?

The demand for lemonade made with real lemons has increased, and a newly invented machine decreases the cost of harvesting lemons.

The graph below represents a perfectly-competitive market for lemons. Lemons are a normal good. Which of the following could explain an increase in the equilibrium quantity in this market from Q1 to Q3?

Price will increase, quantity demanded will decrease and quantity supplied will increase.

The graph below represents a perfectly-competitive product market for bamboo. If the price in the market is currently $4, which of the following do economists predict will occur in this market?

There'd be a shortage of 30 units

The graph below represents a perfectly-competitive product market for bamboo. Which of the following is true based on the above graph if the price of bamboo is currently $4?

$15

The graph below represents an unregulated perfectly competitive market. MSB is a marginal social benefit, MSC is marginal social cost, and MPC is marginal private cost. What is the amount of deadweight loss in the graph above?

Negative externality

The graph below represents an unregulated perfectly competitive market. MSB is a marginal social benefit, MSC is marginal social cost, and MPC is marginal private cost. What market failure is represented in the above graph?

$2 per unit tax

The graph below represents an unregulated perfectly competitive market. MSB is a marginal social benefit, MSC is marginal social cost, and MPC is marginal private cost. Which of the following would correct the market failure in the graph above?

The output of the industry will increase, and the output of the firm will decrease

The graph below represents the short run for a perfectly competitive firm. If the firm's current price is P5, what will happen to the industry output and firm output in the long run?

The firm's price will increase and the firm's output will increase

The graph below represents the short run for a perfectly competitive firm. If the price is currently P2, what will happen to this firm's price and output in the long run?

P4; lowest point of ATC

The graph below represents the short run for a perfectly competitive firm. What will the long-run price for this firm be?

A quantity of 3 represents underallocation of resources to production of premium coffee

The graph represents MB and MC of premium coffee. Which of the following is true?

C

The graphs below represent four different monopolies. In which o the graphs is the monopoly experiencing economic losses?

Earn at least a normal profit

The minimum condition for a monopoly to continue to operate in the long-run is that it must

The stronger the barriers to entry, the more inelastic is the monopolist's demand curve

The relative elasticity of the slope of the monopolist's demand curve is impacted significantly by the level of barriers to entry by rival firms. Which of the following statements reflects an accurate relationship between barriers to entry and the price elasticity of demand for the monopolist's product?

Establishing rules to protect private property and to facilitate the formation of the markets.

The role of government under a pure market economy is limited to which of the following functions?

Amos should produce cookies and Debbi should produce brownies.

The table shows how long it take Amos and Debbi, to produce cookies and brownies. Amos: cookies (1 hr), brownies (2 hrs) Debbi: cookies (2 hrs) and brownies (3 hrs) Based on the table, which of the following would produce the most efficient outcome?

Output and price will both decrease

The wool industry is perfectly competitive and currently in long-run equilibrium. The government grants a lump-sum subsidy to firms operating in the wool industry. Assuming the government continues to provide the lump-sum subsidy, what do economists predict will happen to the profit-maximizing output and price for individual producers of wool as it adjusts to a new long-run equilibrium?

$40

This graph reflects the government's imposition of a $4 excise tax assuming there are no externalities. Based on the graph above, what is the amount of the deadweight loss that is created by the tax?

I, II, III

Which of the following are determinants for the supply of paper? I. A change in the expectations about future prices of paper II. A change in the number of companies selling paper III. A change in the price of wood pulp used to make paper IV. A change in the price of substitutes for paper

I, III, and IV

Which of the following are economic choices that must be made in all economic systems? I. What goods and services will be produced? II. What will the price of the goods and services be? III. How will the goods and services be produced? IV. Who will receive the goods and services?

I, II, III, and IV

Which of the following below would be subtracted from TR to calculate economic profits? I. Property taxes II. Electricity costs III. Wages from job sacrificed to start new business IV. Interest forgone when funds are used to buy equipment

If the price of the product increases, the quantity demanded will decrease

Which of the following best describes the law of demand?

The relationship between price and quantity is direct, all other things equal

Which of the following best describes the law of supply?

II and III

Which of the following correctly describe methods for calculating a firm's economic profits or losses? I. (MR-MC) x Q II.TR-TC III. (P-ATC) x Q IV. P x Q

The government sets and effective price ceiling on a particular product in an attempt to benefit consumers by lowering the price of that product.

Which of the following correctly describes the goals of the government when imposing a price control?

An epidemic that decreases population by 15%

Which of the following could explain the change (inward shift of PPC) in the above graph?

The government creates a central planning committee to make decisions regarding production methods.

Which of the following decision-making processes would most likely occur in a command economy?

II and III

Which of the following describe(s) the output at which an individual firm would be profit-maximizing? I. MC>MR by greatest amnt II. MR=MC III.TR>TC by greatest amnt IV. MR>MC by greatest amnt

The firm's accounting profits are equal to its implicit costs

Which of the following describes a situation in which a firm is earning normal profits?

The government provides free whooping cough vaccines because these vaccines create positive externalities

Which of the following describes an appropriate remedy for a specific market failure?

Alexander can write more words in a day than James.

Which of the following describes an example of absolute advantage?

Consumer surplus falls to zero because consumers must pay the maximum price they are willing to pay

Which of the following describes how perfect price discrimination by a monopoly affects the amount of consumer surplus?

All of the above

Which of the following do economists expect to occur when the government sets effective price ceilings or floors in markets that are currently allocatively efficient?

Additional variable resources crowd fixed resources.

Which of the following explains why the law of diminishing marginal returns occurs?

"Herd" immunity that leads to protection from a disease as a result of others being vaccinated against the disease

Which of the following is an example of a positive externality?

Chocolate-covered pretzels are sold in a candy store for $7.50 a pound even though low costs mean they could be sold for $2 a pound.

Which of the following is an example of producer surplus?

Price taker

Which of the following is not a characteristic of a monopoly?

It is the portion of the MC curve lying above the AVC curve

Which of the following is true about a perfecty competitive firm's supply curve?

Decisions about what to produce and trade should be based on comparative advantage.

Which of the following is true regarding the importance of comparative and absolute advantage to making efficient production and trade decisions?

Sarah is the tallest member of her basketball team and the best outside shooter, but the coach decides that she should play forward because her height at power forward will help the team more than her outside shooting at guard.

Which of the following situations best represents comparative advantage?

A and B only (The firm is producing goods using the most efficient production techniques possible

Which of the following statements can be said of a perfectly competitive firm in long-run equilibrium?

R; one of the points inside the curve

Which point on the above graph could represent 10% unemployment of labor?

The equilibrium price would be intermediate, but equilibrium quantity would increase

With conventional supply and demand curves, if both demand and supply increase,

The graph below represents a profit maximizing monopoly. Which area on the graph represents consumer surplus?

cad