AP Economics Practice Mid Term

If the price for a product produced in a competitive market increases, which of the following is most likely to occur in the labor market for workers who produce that product? A. The demand for labor and number of workers hired both increase B. The supply of labor and the number of workers hired both increase C. The demand for labor and number of workers hired both decrease D. Nothing happens

A.

Which of the following events will cause the demand curve for cheeseburgers to shift to the right? A. An increase in the price of pizza (substitute) B. An increase in the price of French fries (complement) C. An increase in price of cheeseburgers D. A decrease in cost of producing cheeseburgers

A. An increase in the price of pizza (substitute)

"The total value of all output produced within a country's geographical borders over a period of time." This is a definition of... A. Gross Domestic Product B. Net domestic product C. Gross National Product D. Gross domestic fixed capital formation

A. Gross Domestic Product

When the price of a good changed the income effect on quantity demanded was greater than the substitution effect. The good is therefore a A. Normal good B. Veblen good C. Geffen good D. substitute good

A. Normal good

Market equilibrium occurs at that price for which... A. Quantity supplied equals quantity demanded B. Cost Equals the wages of labor C. the surplus quantity drives increases demand D. Quantity supplied exceeds quantity demanded

A. Quantity supplied equals quantity demanded

The term utility means... A. Satisfaction received from consuming goods and services B. real income available to consumers C. Relationships between demand and supply D. usefulness of a good or service

A. Satisfaction received from consuming goods and services

Another term that could be used for elasticity is... A. Sensitivity B. Utility C. Surplus D. Slope

A. Sensitivity

A permanent reduction in demand for a single product will cause A. Structural unemployment B. Frictional unemployment C. Voluntary unemployment D. Demand Deficient unemployment

A. Structural unemployment

A country can consume beyond its present production possibilities curve when it.... A. Trades with other countries B. Reduces unemployment C. Experiences decreasing opportunity costs D. Prints more money

A. Trades with other countries

In a market for a product with positive externalities A. all benefits are not internalized B. there is too much production C. profits are too low D. profits are too high

A. all benefits are not internalized

If the price elasticity of demand for a commodity is equal to one, a reduction in its price will lead to an increase in A. quantity demanded B. the seller's total revenue C. Expenditures on substitutes D. the seller's marginal revenue

A. quantity demanded

If a normal good is produced in a competitive market, which of the following combinations of events could cause the price of the good to increase and the quantity to decrease? A. An increase in the average income of consumers and an increase in the number of producing firms B. An increase in the average income of consumers and an increase in the price of a variable input C. An increase in the price of a substitute good and an increase in the number of producing firms D. A decrease in the number of consumers and an increase in the number of cocker spaniels

B. An increase in the average income of consumers and an increase in the price of a variable input

Which of the following defines a free good? A. It has zero price B. Its production involves no opportunity cost C. It is always provided by the government D. It gives consumers no satisfaction

B. Its production involves no opportunity cost

A profit maximizing firm will hire... A. Labor until it's wage rage equals it's average revenue product B. Labor until it's wage equals it's marginal revenue product C. Labor until it's wage rate equals the interest rate D. Labor without limit

B. Labor until it's wage equals it's marginal revenue product

The basic economic problem of all countries is the existence of... A. Tax increases and budget deficits B. Limited resources and unlimited wants C. Unemployment and inflation D. Unions and monopolies

B. Limited resources and unlimited wants

Economics, as a social science, works upon the assumption that the basic economic problem exists because of... A. unpredictable human behavior B. Scarce resources C. Profit Maximization D. Social Costs

B. Scarce Resources

Which would cause a demand curve for cars to shift to the right? A. a fall in the price of cars B. an increase in public transportation prices C. a decrease in credit available D. a rise in gas prices

B. an increase in public transportation prices

If the demand curve is a vertical line A. demand is perfectly elastic B. demand is perfectly inelastic C. Demand is unit elastic D. supply is a horizontal line

B. demand is perfectly inelastic

A consumer's budget line shows A. the utility individuals receive from consuming various combinations of goods B. the combination of 2 goods that an individual would be able to purchase given prices and income C. How income is influenced by prices D. how changes on income affect utility

B. the combination of 2 goods that an individual would be able to purchase given prices and income

Which of the following will most likely occur in an economy if more money is demanded than supplied? A. The amount of investment spending will increase B. Interest rates will decrease C. Interest rates will increase D. McDonald's will add 4 new items to the dollar menu

C. Interest rates will increase

The price elasticity of demand is important to firms because A. it explains the relationship between income and demand for the goods they sell B. It shows how price changes affect total expenditures on the goods they sell C. It helps identify the equilibrium price and quantity in the market D. It has something to do with supply

C. It helps identify the equilibrium price and quantity in the market

Which of the following must be true if the revenues of wheat farmers increase when the price of wheat increases? A. The supply of wheat is price elastic B. The supply of wheat is income elastic C. The supply of wheat is income in elastic D. The demand for wheat is income inelastic

C. The supply of wheat is income in elastic

Governments use cost benefit analysis to A. measure the net social benefit of a project B. make consumers pay for the net social benefits they receive C. minimize social costs D. Make producers pay for the social costs of a project

C. minimize social costs

If rent controls are imposed on housing below the current market rent A. total rent income to property owners will increase B. quality of rented property will rise C. supply of rented property will fall D. housing shortage will disappear

C. supply of rented property will fall

If bologna is an inferior good, which of the following must be true? A. The demand curve for bologna is vertical B. The demand curve for bologna is horizontal C. An increase in the price of bologna will decrease the supply D. An increase in consumer income will decrease the demand for bologna

D. An increase in consumer income will decrease the demand for bologna

Which of the following would be described as a merit good? A. Defense B. car production C. Health care D. Broadcasting

D. Broadcasting

When a perfectly competitive firm sells additional units of output, it's total revenue will... A. Remain constant B. Increase rapidly at first and then decline C. Increase at a decreasing rate D. Increase at a constant rate

D. Increase at a constant rate

Two products are perfect substitutes for each other. Their cross elasticity of demand is... A. negative B. Zero C. One D. Infinite

D. Infinite

An individuals labor supply curve is derived from that persons preferences about the trade off between income and... A. Work B. Wealth C. Productivity D. Leisure

D. Leisure

Which is not a factor of production? A. land B. labor C. Capital D. Money

D. Money

All of the following are included in computing the opportunity cost of going to college EXCEPT... A. Interest on student loans B. Wages the student gave up by attending college C. Money spent on college tuition D. Money spent for cool college clothes

D. Money spent for cool college clothes

A company decides to stop building houses and build office blocks instead. What is the opportunity cost to the company? A. The additional office blocks built B. The cost of building houses C. The cost of building office blocks D. The loss of building houses

D. The loss of building houses

An increase in supply results in a A. Increase in demand B. decrease in equilibrium quantity and an increase in equilibrium price C. decrease in equilibrium quantity and an decrease in equilibrium price D. decrease in equilibrium price and an increase in equilibrium quantity

D. decrease in equilibrium price and an increase in equilibrium quantity

A normative statement in economics... A. is based on things that are normal B. is based on facts C. is open-ended D. depends on value judgments

D. depends on value judgments

Marginal utility... A. increases as more of a good is consumed B. increases as the total utility of consuming a good increases C. is the same as the utility of consuming a good D. is the same as consuming an additional unit of a good

D. is the same as consuming an additional unit of a good

The cross elasticity of demand for good X with respect to a change in the price of Good Y Is zero. Good X and Good Y are... A. Substitute goods B. Complementary goods C. Merit goods D. neither complementary nor substitute goods

D. neither complementary nor substitute goods