AP Econ Final Exam

A firm can dig a well using three combinations of labor and capital. The table below summarizes the three combinations of labor and capital. Which of the following statements is true? a. the firm will choose combination X to minimize the cost of digging the well b. the firm will choose combination Y to minimize the cost of digging the well c. the firm will choose combination Z to minimize the cost of digging the well d. the firm is indifferent between combinations X and Y to minimize the cost of digging the well e. the firm is indifferent between combinations Y and Z to minimize the cost of digging the well

the firm is indifferent between combinations X and Y to minimize the cost of digging the well

If economic profit for a firm is negative: a. the firm should exit the industry in the long run b. accounting profit must also be negative c. the firm should stay in business so long as accounting profit is positive d. the firm will not owe any taxes to the government e. the firm is earning a normal profit

the firm should exit the industry in the long run

Which of the following would cause the supply of nurses to increase? a. the overall size of the workforce decreased b. the government required another year of college before a nurse could find employment c. the wage for nurses fell d. the government offered to pay for student loans if students enrolled in nursing school e. the value of wealth increased

the government offered to pay for student loans if students enrolled in nursing school

Perfect competition is characterized by: a. rivalry in advertising b. fierce quality competition c. the inability of any one firm to influence price d. widely recognized brands e. an inefficient quantity of output being produced

the inability of any one firm to influence price

Given that there is general agreement that pollution is undesirable and social welfare is increased by reducing pollution, the optimal level of pollution in a society is: A. zero. B. that level that reduces marginal social costs of pollution to zero. C. the level of pollution at which the marginal social cost of pollution is equal to the marginal social benefit of pollution. D. the level of pollution that minimizes the average total cost of producing the product. E. the level of pollution at which the marginal social cost of pollution is equal to the marginal social benefit of pollution

the level of pollution at which the marginal social cost of pollution is equal to the marginal social benefit of pollution

A firm is hiring labor and capital in the cost-minimizing combination. Which of the following would cause the firm to increase hiring labor and decrease hiring capital? a.demand for the product being produced increases by 5% b. the price of capital and labor both increase by 5% c. the productivity of labor increases by 5% d. the price of the capital decreases by 5% e. the price of labor increases 5%

the productivity of labor increases by 5%

A duopoly is an industry that consists of: A. a single firm. B. two firms. C. three or more firms. D. a large number of small firms.

two firms

Economist formally identify the satisfaction a person derives from the consumption of goods and services as: a. happiness b. usefulness c. utility d. pleasure e. cost

utility

A perfectly price-inelastic demand curve is: a. horizontal b. downward-sloping c. upward sloping d. vertical e. more elastic at the top of the demand curve, and less elastic at the bottom of the curve

vertical

The opportunity cost of something is: a. greater during periods of rising prices b. equal to the money costs c. less during periods of falling prices d. what is given up to acquire it e. equal to zero for something that is given to you as a gift

what is given up to acquire it

A good is inferior if: a. when income increases, the demand remains unchanged b. when income increases, the demand decreases c. when income increases, the demand increases d. income and the demand are unrelated e. when income decreases, the demand increases

when income increases, the demand decreases

A good is normal if: a. when income increases, the demand remains unchanged b. when income increases, the demand decreases c. when income increases, the demand increases d. income and the demand are unrelated e. when income decreases, the demand increases

when income increases, the demand increases

Which of the following is an example of an activity generating a negative externality? a. you buy a new car, and then discover it needs a new transmission b. Jane enjoys canoeing on a quiet mountain lake c. the only two coffee shops in town conspire to raise prices d. after Jane bought health insurance, she began racing motorcycles on the weekend e. your next-door neighbor mows the lawn at 6 AM

your next-door neighbor mows the lawn at 6 AM

When the supply curve shifted from S1 to S2, the new intersection of supply and demand has a price of _______ and a quantity of 400. This could have resulted from _______. a. $1.50; an increase in consumers' income if gasoline is a normal good b. $1.50; an increase in refining technology c. $2.00; an increase in the number of buyers d. $2.00; an increase in consumers' income e. $1.50; an increase in the price of crude oil

$1.50; an increase in refining technology

Using the information in the table, if the price of a ticket to see Phantom of the Opera is $50, then Robert's consumer surplus is: a. $60 b. $50 c. $10 d. $240 e. $110

$10

If the box-office price of a ticket to see Phantom of the Opera is $130, and there is no other market for tickets, the total consumer surplus for the five students is: a. $150 b. $125 c. $20 d. $0 e. $130

$20

Debbie owns a bakery and can hire workers to produce cakes selling in a competitive output market at $10 each. The table shows the relationship between the number of workers and the number of cakes produced. What is the value of the marginal product for the fourth worker? a. five cakes b. $50 c. $210 d. 21 cakes e. $250

$50

The table shows some cost data for a firm currently operating in the short run. What is the value of the total fixed cost for this firm? a. $40 b. $50 c. $100 d. $70 e. It is impossible to determine without more information

$50

Rodger is deciding how many football games he wants to attend this year. The total benefit that Rodger receives from football games is shown in the table. If the tickets to each football game cost $75 he should attend _______ game(s). a. 0 b. 1 c. 2 d. 5 e. 3

0

The table shows the maximum amounts of coffee and salmon that Brazil and Alaska can produce if they just produce one good the opportunity cost of producing 1 unit of salmon for Alaska is: a. 2 coffees b. 1/4 coffee c. 10 coffee d. 1/2 coffee e. 1 coffee

1 coffee

Rodger is deciding how many football games he wants to attend this year. The total benefit that Rodger receives from football games is shown in the table. Rodger's marginal benefit from increasing the number of games that he attends is from two to three is: a. 40 b. 120 c. 10 d. 20 e. 30

30

The table describes Bart's perfectly competitive skateboard-producing firm. If the market price is $60, how many skateboards will the firm produce and how much profit will Bart earn? a. 0; -$10 b. 4; $70 c. 5; $55 d. 4; $240 e. 5; $105

4; $70

Using the table above, the total product of labor for five workers is: a. 11 bushels b. 45 bushels c. 55 bushels d. 75 bushels e. 64 bushels

75 bushels

Using the information in the table, when the quantity increases from one to two, marginal cost equals: a. 13 b. 10 c. 18 d. 17 e. 8

8

If the price of coconuts decreases, then the movement that would take place in the model could be: a. A to C b. B to A c. C to A d. E to B e. A to B

A to B

All other things unchanged, when a good or service is characterized by a relatively inelastic supply, as shown in Panel _______, the greater share of the burden of an excise tax imposed on it is borne by _______. a. A; buyers b. B; sellers c. A; sellers d. B; buyers e. D; buyers

B; sellers

The figure shows costs curves for a firm operating in a perfectly competitive market. M is the _______ curve. a. ATC b. MR c. profit d. AVC e. MC

MC

What might cause the supply curve to shift from S2 back to the inital supply curve S1? a. The organization of Petroleum Exporting Countries (OPEC) restricts the production of crude oil b. The government decreases the per-gallon tax on gasoline production c. Americans want to buy more gasoline d. Technology in the refinement of gasoline greatly improves e. The price of crude oil decreases

The organization of Petroleum Exporting Countries (OPEC) restricts the production of crude oil

The following are four statements about monopoly and perfect competition. Which of these is correct? a. a monopolist has market power while a perfect competitor does not b. like a perfectly competitive firm, a monopoly can make positive economic profits in the long run c. a monopoly will charge a higher price and produce a larger quantity than a competitive market with the same demand and cost structure d. monopoly profits cannot continue to exist in the long run, because there are no barriers to entry e. the demand for the monopolist's product is highly elastic due to many available substitutes

a monopolist has market power while a perfect competitor does not

A monopoly is a market characterized by: a. a single seller b. a product with many close substitutes c. a large number of small firms d. a small number or large firms e. a small number of small firms

a single seller

Advertising is an economically productive activity and not a waste of resources because: a. advertisements increase sales b. advertising improves the quality of the products being advertised c. advertisements can signal that firms are desperate for customers d. advertising can decrease the costs of production e. advertisements can convey information about the product

advertisements can convey information about the product

In perfectly competitive long-run equilibrium: a. all firms make positive economic profits b. all firms produce at the minimum point of their average total cost curves c. the industry supply curve must be upward-slopping d. all firms face the same price, but the value of marginal cost will vary directly with firm size e. the price will equal average variable cost

all firms produce at the minimum point of their average total cost curves

Each has two strategies available to it: a high price and low price. The dominant strategy for Purple Rain is to: a. always charge a low price b. always charge a high price c. always adopt the same strategy as Blue Spring d. Purple Rain does not have a dominant strategy e. always adopt the opposite strategy as Blue Spring

always charge a low price

Suppose that the average cost of a doctor's visit is $100. If the government imposes a price ceiling of $50 on the cost of a doctor's visit, there will be: a. an excess supply of doctor's visits b. an excess demand for doctor's visits c. an increase in the equilibrium number of doctor's visits d. no change in the number of doctor's visits e. an increase in the total efficiency of this market

an excess demand for doctor's visits

Attempts by the federal government to prevent the exercise of monopoly power in the United States are known as _____ policy. a. stabilization b. antitrust c. fiscal d. government e. monetary

antitrust

If the price of a good is increased by 15% and the quantity demanded changes 20%, then the absolute value of the price elasticity of demand is equal to: a. 0.75 b. approximately 0.33 c. approximately 1.33 d. 1 e. zero

approximately 1.33

The law of demand states that, other things equal: a. as the price increases, the quantity demanded will increase b. as the price decreases, the demand curve will shift to the right c. as the price increases, the demand will decrease d. as the price increases, the quantity demanded will decrease e. as the price decreases, the demand curve will shift to the left

as the price increases, the quantity demanded will decrease

A monopoly is a market structure characterized by: a. a single buyer and several sellers b. a product with many close substitutes c. a large number of small firms d. price-taking behavior e. barriers to entry and exit

barriers to entry and exit

In the classic prisoners' dilemma with two accomplices in crime, the Nash equilibrium is for: a. both individuals to not confess b. both individuals to confess c. the first player to confess and the second player to not confess d. this game does not have a Nash equilibrium e. the first player to not confess and the second player to confess

both individuals to confess

The combination of guns and butter at point H: a. can be attained, but would cost too much b. is unattainable due to excessive government gun regulation c. has no meaning since it does not relate to the preferences of consumers d. is attainable but would increase unemployment e. cannot be attained, given the level of technology and the factors of production available

cannot be attained, given the level of technology and the factors of production available

Price discrimination is the practice of: a. offering differentiated products to consumers with different tastes b. paying different prices to suppliers of different goods c. equating price to marginal cost d. equating price to marginal revenue e. charging different prices to buyers of the same good

charging different prices to buyers of the same good

The pair of items likely to have the largest positive cross-price elasticity of demand is: a. coffee and tea b. skis and ski boots c. pizza and pepperoni d. milk and cookies e. laptop computers and beanbag chairs

coffee and tea

An economy that has the lowest opportunity cost for producing a particular good is said to have a(n):\ a. technological advantage b. comparative advantage c. production possibility curve d. increasing opportunity costs e. absolute advantage

comparative advantage

Output per period in the region A to B indicates that a firm is experiencing: a. constant returns to scale b. economics of scale c. diseconomics of scale d. constant total cost as output increases e. zero varible costs

constant returns to scale

The government decides to impose a price ceiling on a good, because it thinks the market-determined price is "too high" If the government imposes the price ceiling below the equilibrium price: a. consumers will respond to the lower price and therefore wish to purchase more of the good than at the equilibrium price b. producers will respond to the lower price and therefore offer more units for sale c. consumers will be able to purchase more of the good after the price ceiling is imposed d. it will not be binding e. a surplus of the good will exist

consumers will respond to the lower price and therefore wish to purchase more of the good than at the equilibrium price

If goods A and B are substitutes, a decrease in the price of good B will: a. increase the demand for good A b. increase the demand for good B c. decrease the demand for good A d. increase the demand for good B and decrease the demand for good A e. increase the quantity of good B demanded and increase the demand for good A

decrease the demand for good A

If goods A and Z are complements, an increase in the price of good Z will: a. increase the demand for good A b. increase the quantity of good Z demanded and decrease the demand for good A c. decrease the demand for good Z d. decrease the demand for good A and decrease the demand for good Z e. decrease the demand for good A

decrease the demand for good A

Output per period in the region B to C indicates that a firm is experiencing: a. constant returns to scale b. diseconomics of scale c. economics of scale d. falling marginal costs e. increasing returns to scale

diseconomics of scale

Output per period in the region from 0 to A indicates that a firm is experiencing: a. diseconomics of scale b. constant returns to scale c. decreasing returns to scale d. negative costs of production e. economics of scale

economics of scale

A firm will adjust prices so that customers with more _______ demand pay _______ prices than those customers with ________ elastic demand a. inelastic; lower; less b. elastic; higher; more c. elastic; the same; more d. elastic; higher; less e. elastic; lower; less

elastic; lower; less

A natural monopoly exists whenever a single firm: a. is owned and operated by the federal or local government b. is investor-owned but has been granted the exclusive right by the government to operate in a market c. earns economic profits in the long run d. has gained control over a strategic input of an important production process e. experiences economics of scale over the entire range of production that is relevant to its market

experiences economics of scale over the entire range of production that is relevant to its market

Pigouvian taxes are taxes desighned to reduce: a. the marginal cost of production b. the marginal benefit of consumption c. external costs d. external benefits e. government tax revenue

external costs

If firms are making positive economic profits in the short run, then in the long run: a. the short-run industry supply curve will shift leftward b. firms will enter the industry c. industry output will rise and price will rise d. firms will leave the industry e. the price will decrease to where price equals average variable cost

firms will enter the industry

Debbie owns a bakery and can hire workers to produce cakes selling in a competitive output market at $10 each. The table shows the relationship between the number of workers and the number of cakes produced. If Debbie must pay each worker a competitive market wage of $40 per day, how many workers will she hire to maximize profit? a. three b. four c. two d. six e. five

five

An input whose quantity CANNOT be changed in the short run is: a. marginal input b. fixed input c. incremental input d. variable input e. substitute input

fixed input

Luke Skywalker operates a moisture farm on the planet Tatooine. The moisture farm utilizes droids. Luke's production function is given in the table. A barrel moisture sells for 10 Republic Credits. A droid costs 65 Republic Credits per month to rent. How many droids should Luke rent? a. one b. two c. three d.four e. five

four

Price-takers are individuals in a market who: A. select a price from a wide range of alternatives. B. select the lowest price available in a competitive market. C. select the average of prices available in a competitive market. D. have no ability to affect the price of a good in a market. E. select the price that maximizes profit

have no ability to affect the price of a good in a market

Suppose the government sets a price floor below the current price of the good. This price floor will: a. result in an excess supply of the good b. result in an excess demand for the good c. have no effect on the price of the good d. increase the quantity supplied of the good e. create inefficiency

have no effect on the price of the good

Because of monopoly, consumers typically have: a. more choices b. larger quantities c. higher quality d. higher prices e. more consumer surplus

higher prices

The pair of items that is most likely to have a negative cross-price elasticity of demand is: a. aspirin and hamburgers b. hot dogs and mustard c. margarine and butter d. ketchup and coffee e. coffee and tea

hot dogs and mustard

Points A, B, E, and F: a. indicate combinations of guns and butter that society can produce using all of its factors efficiently b. show the opportunity cost of more guns increases, but that of more butter decreases c. indicate that society wants butter more than it wants guns d. indicate constant costs for guns and increasing costs for butter e. indicate that society is experiencing many idle resources

indicate combinations of guns and butter that society can produce using all of its factors efficiently

Human capital is the improvement it _________ created by _______. a. physical capital; technology b. labor; education and knowledge c. labor; physical capital d. labor; management e. labor; unemployment

labor; education and knowledge

Monopolistic competition is an industry characterized by a: a. small number of firms producing identical products, with barriers to entry for firms b. small number of firms producing similar products, with relatively easy entry for firms c. large number of firms producing similar products, with relatively easy entry for firms d. large number of firms producing identical products, with relatively easy entry for firms e. large number of firms producing identical products, with barriers to entry for firms

large number of firms producing similar products, with relatively easy entry for firms

For most firms, economic profit is: a. less than accounting profit b. equal to accounting profit c. greater than accounting profit d. negative in the short run e. positive in the short run but negative in the long run

less than accounting profit

The long run is a planning period: a. too short to vary all inputs b. that is at least 5 years in length c. that must be over 6 months in length d. that must be between 6 months and 5 years e. long enough such that a firm can consider all inputs as variable

long enough such that a firm can consider all inputs as variable

The short run is always defined as a period that is: a. less than 1 week b. less than 1 month c. long enough such that output can vary, but plant capacity cannot d. long enough to make all economic adjustments e. a period too short to vary any production

long enough such that output can vary, but plant capacity cannot

The amount by which total utility increases or decreases when an additional unit of a good is consumed is called ______ utility. a. average b. diminishing c. maximum d. marginal e. cumulative

marginal

The study of a single firm and how it determines prices would fall under: a. macroeconomics b. microeconomics c. economic growth d. fiscal policy e. the Federal Reserve

microeconomics

An industry characterized by many firms, producing similar but differentiated products, in a market with easy entry and exit is called: a. perfect competition b. monopoly c. monopolistic competition d. oligopoly e. duopoly

monopolistic competition

Compared to perfect competition: a. monopoly produces more at a lower price b. monopoly produces where MR>MC, and a perfectly competitively firm produces where P=MC c. monopoly may have economic profits in the long run, but in monopoly economic profits are zero in the long run d. perfect competition may have economic profits in the long run, but in monopoly economic profits are zero in the long run e. monopoly produces where MR=MC, and perfectly competitively firm produces where P=MR>MC

monopoly may have economic profits in the long run, but in monopoly economic profits are zero in the long run

For the Colorado beef industry to be classified as perfectly competitive, ranchers in Colorado must have ________ on prices and beef must be a ________ product. a. no noticeable effect, standardized b. a huge effect, standardized c. a huge effect, differentiated d. no noticeable effect, differentiated e. no noticeable effect, price inelastic

no noticeable effect, standardized

A public good is a good or service for which exclusion is: a. possible and which is rival in consumption b. possible and which is nonrival in consumption c. not possible and which is rival in consumption d. not possible and which is nonrival in consumption e. not possible and which is rival in production

not possible and which is nonrival in consumption

A common resource is a good or service for which exclusion is: a. possible and which is rival in consumption b. possible and which is nonrival in consumption c. not possible and which is rival in consumption d. not possible and which is nonrival in consumption e. not possible and which is rival in production

not possible and which is rival in consumption

The market structure characterized by few interdependent firms in which there are barriers to entry is called: a. monopolistic competition b. perfect competition c. oligopoly d. monopoly e. game theory

oligopoly

Tradable pollution permits are a(n): a. tax system for internalizing pollution costs to the market b. subsidy system for charging consumers for the use of common property resources c. system of voluntary negotiations between polluters and damaged parties d. organized exchange of licenses that enable the holder to pollute up to a specified amount during a given time period e. part of a framework in which the government specifies exactly how polluters must reduce their emissions

organized exchange of licenses that enable the holder to pollute up to a specified amount during a given time period

If the only firms in an industry openly agree to fix the price at a given level, then this is an example of: a. overt collusion b. price leadership c. contestability d. tacit collusion e. non-cooperative strategies

overt collusion

An artificially scarce good is a good or service for which exclusion is: a. possible and is rival in consumption b. possible and is nonrival in consumption c. not possible and is rival in consumption d. not possible and is nonrival in consumption e. not possible and which is rival in production

possible and is nonrival in consumption

A private good is a good or service for which exclusion is: a. not possible and which is rival in production b. possible and which is nonrival in consumption c. not possible and which is rival in consumption d. not possible and which is nonrival in consumption e. possible and which is rival in consumption

possible and which is rival in consumption

The price elasticity of demand for ski lessons in New Hampshire is greater than 1.00. This means that the demand for ski lessons is ______ in New Hampshire. a. price elastic b. price inelastic c. price unit-elastic d. perfectly price elastic e. perfectly price inelastic

price elastic

A minimum price set above the equilibrium price is a: a. demand price b. supply price c. price floor d. price ceiling e. quota limit

price floor

The price elasticity of demand is computed as the percentage change in: a. quantity demanded divided by the percentage change in quantity supplied b. price divided by the percentage change in quantity demanded c. quantity demanded divided by the percentage change in income d. quantity demanded divided by the percentage change in price e. quantity supplied divided by the percentage change in price

quantity demanded divided by the percentage change in price

A quota id essentially a: a. quantity restriction b. price control c. consumer surplus d. means to combat black markets e. tax on each unit produced

quantity restriction

The principle of diminishing marginal utility: a. refers to the tendency of total utility to increase until an individual's budget is no longer constrained b. refers to the tendency of marginal utility to decline as the amount of consumption of a good or service increases c. indicates that, if a good is inferior, less of it will be purchased when income falls d. assumes all goods are normal e. refers to the possibility that some demand curves are upward sloping

refers to the tendency of marginal utility to decline as the amount of consumption of a good or service increases

Critics of advertising argue that it: a. tends to make markets more perfect b. leads to low-cost mass production c. results in higher prices to consumers d. encourages competition through new-product advertising e. tends to benefit small new firms at the expense of large established firms

results in higher prices to consumers

If the price is consistently below the average variable cost, then in the short run a perfectly competitive firm should: a. raise price b. sell more output c. maintain the current level of output d. lower price to sell more e. shutdown

shutdown

Oligopoly is a market structure that is characterized by a: a. small number of interdependent firms producing identical or differentiated products b. small number of independent firms producing identical or differentiated products c. large number of relatively small independent firms producing differentiated products d. large number of relatively small independent firms producing identical products e. one dominant firm producing a product with no close substitutes

small number of interdependent firms producing identical or differentiated products

Price leadership occurs if: a. smaller firms in an industry silently agree to charge the same price as the largest firm b. two or more firms in an industry agree to fix the price at a given level c. competition among a large number of small firms generates a stable market price d. competition among a large number of small firms generates similar, but slightly different prices e. the government regulates the price that all firms must set for the product

smaller firms in an industry silently agree to charge the same price as the largest firm

If the prices of inputs (e.g., labor, fertilizer, and fuel) used to produce and transport coconuts are increasing, then the movement in the model could be: a. A to B b. B to A c. C to A d. E to B e. B to C

C to A

The ________ is widely used to measure income inequality. a. Gini coefficent b. median household income c. poverty rate d. ability-to-pay principle e. unemployment rate

Gini coefficent