AP Micro Econ
Which of the following is an example of capital? A) petroleum B) a construction worker C) an acre of farmland D) a factory E) a cheeseburger dinner
D
A collusive agreement to fix prices among firms in an oligopolistic industry is most likely to be broken under which of the following conditions? A It is easy for new firms to enter into the industry. B All of the firms have identical costs. C The number of firms is few. D Firms' sales are widely reported. E The market demand is stable.
A
All opportunity costs are A) values of alternatives that must be given up B) forgone monetary payments C) losses of time D) related to educational opportunities E) nonmonetary
A
Diminishing returns are a common result of A more of one input being added to a fixed quantity of another input. B the quantities of two inputs being increased at the same time. Cthe quantities of two inputs being decreased at the same time. D the profit of a firm being limited by increasing competition. E the profit of a firm being limited by increasing input costs.
A
If the three largest widget producers control 85 percent of the total widget market, then these producers are operating in A an oligopoly B monopolistic competition C perfect competition D a monopoly E a cartel
A
The law of demand states that the relationship between price and the quantity demanded is A) negative B) unclear C) weak D) positive E) direct
A
The slope of the total product curve is also known as the A marginal product. B average product. C average revenue. D marginal cost. E profit.
A
Which of the following defines the short run? A when at least one input is fixed B when no inputs are variable C when only one input is variable D less than a year E when all inputs are fixed
A
Which of the following helps explain why the demand curve for a normal good is downward sloping? (A) The income and substitution effects move the quantity demanded in the same direction. (B) The income effect moves the quantity demanded in the opposite direction of the substitution effect. (C) The income effect dominates the substitution effect. (D) The substitution effect dominates the income effect. (E) With an increase in income, the consumer decreases consumption of the good.
A
A cartel is difficult to maintain for which of the following reasons? A Consumers substitute away from the good when the price increases. B Individual cartel members are tempted to cheat on the agreement. C Although the total gain to cartel members is positive, all members lose when everyone sticks to the agreement. D Some firms will reduce output in an effort to lower costs of production. E Oligopolistic behavior is generally predictable.
B
A firm currently produces 1000 units of output and has total costs of $15,000 and fixed costs of $3000 What is the firm's average variable costs? A) 15 B) 12 C) 19 D) 0 E) 3
B
Antitrust policy seeks to prevent or eliminate which of the following practices? A Firing of workers B Collusion and price fixing C Pollution of rivers D Monopolistic competition E Discrimination in the labor market
B
Suppose that a firm begins to hire workers for a newly completed plant with a fixed amount of machinery. As the firm hires additional workers, one would expect the marginal product to (A) fall initially, but eventually rise (B) rise initially, but eventually fall (C) rise consistently due to diminishing return (D) rise consistently due to the advantages of specialization (E) rise consistently due to economies of scale
B
When a firm is producing zero output, the total cost equals A the average total cost. B the fixed cost. C the marginal cost. D zero. E the variable cost.
B
When the returns to an input are diminishing and a profit-maximizing firm chooses to hire more of that input, the total product curve has what kind of slope? A negative and decreasing B positive and decreasing C positive and increasing D negative and increasing E positive and constant
B
A decrease in the price of butter would most likely decrease the demand for A) milk B) bagels C) margarine D) jelly E) syrup
C
A production function shows the relationship between inputs and A total revenue. B profit. C output. D fixed costs. E variable costs.
C
Which of the following statements regarding accounting profits, opportunity costs, and economic profits is true? A With positive opportunity costs, a firm can never earn economic profits. B Accounting profits are equal to economic profits minus opportunity costs. C If accounting profits are less than opportunity costs, there will be economic losses. D Economic profits must always be greater than accounting profits. E When economic profits are positive, accounting profits may be positive or negative.
C
A monopolistically competitive profit-maximizing firm is currently producing and selling 2,000 units of output. At this output level, marginal revenue is $9, average revenue is $10, and the average variable cost is $8. The product price is A $8 B $9 C $10 D greater than $10 E less than $8
C, AR equals price at LR mon comp equilibrium
A horizontal marginal product curve would indicate that the total product curve is A horizontal. B downward-sloping. C upward-sloping. D vertical. E downward-sloping and then upward-sloping.
C, if you chose A - A horizontal total product curve implies that the total product remains fixed no matter the amount of input. What would be the marginal product in this case?
Historically, the limits imposed by diminishing returns have been alleviated primarily by A population growth. B the teachings of Thomas Malthus. C investments in capital and technology. D the lessons of economic models. E new discoveries of land.
C, if you chose D - While economic models illuminate the problems associated with rising population and diminishing returns, they did not help overcome them.
Because the market supply curve is the sum of individual producers' supply curves, an increase in the number of producers will cause which of the following? A) a movement to the right along the supply curve B) the supply curve to shift to the left C) the supply curve to shift to the right D) a movement to the left along the supply curve E) the supply to decrease
C, more producers means more product is being made, so supply curve shifts to the right because it more product = more supply
After graduating from high school, Peggy Smith decided to enroll in a two-year program at the local community college rather than to accept a job that offered a salary of $12,000 per year. If the annual tuition and fees are $4,600, the annual opportunity cost of attending the community college is (A) $4,600 (B) $7,400 (C) $12,000 (D) $16,600 (E) $24,000
D
An increase in the effective minimum wage will have less of an impact on employment if the demand for labor is (A) a derived demand (B) decreasing (C) relatively elastic (D) relatively inelastic (E) unit elastic
D
Assume that people like onions on their hamburgers. If the supply of hamburgers decreases, the demand for onions will most likely (A) remain unchanged because hamburgers and onions are different goods (B) increase because hamburgers and onions are substitutes (C) increase because hamburgers and onions are complements (D) decrease because hamburgers and onions are complements (E) decrease because hamburgers and onions are substitutes
D
If the marginal cost of producing the first unit of some good is $20 and the marginal cost of producing the second unit is $30, the average variable cost of producing 2 units is A $5 B $10 C $20 D $25 E $50
D
In the short run, which of the following costs must continuously decrease as output produced increases? (A) Total variable cost (B) Total fixed cost (C) Average variable cost (D) Average fixed cost (E) Average total cost
D
Which of the following statements is normative? A) Gas prices are expected to fall in the near future. B) When the price of gasoline rises, drivers buy less gasoline. C) The price of gasoline is rising. D) The price of gasoline is too high. E) Cars can run on gasoline, electricity, or diesel fuel.
D, includes value judgemend
ABC Limited, Inc., sells its product in a perfectly competitive market for a price of $15 per unit and hires workers at a daily wage of $75. Labor is the only factor cost, and the firm is currently earning profits. If ABC hires one more worker and output increases by 5 units per day, the firm's profits will A decrease by $5 B decrease by $75 C increase by $75 D increase by $15 E remain unchanged
E
Which of the following will increase the demand for disposable diapers? A) concern over the environmental effect of landfills B) a decrease in the price of cloth diapers C) a decrease in the price of disposable diapers D) a move toward earlier potty training of children E) a new "baby boom"
E
Which of the following questions is studied in microeconomics? A) Has the overall level of prices in the economy increased or decreased this year? B) What government policies should be adopted to promote employment in the economy? C) What determines the overall salary levels paid to workers in a given year? D) How many people are employed in the economy this year? E) Should I go to college or get a job after I graduate?
E, opportunity cost
The law of supply states that the relationship between price and quantity supplied is A) positive B) unclear C) negative D) weak E) indirect
as price goes up, quantity goes up as price goes down, quantity goes down
Antitrust legislation is designed to make it illegal for a firm to monopolize an industry. Which of the following best states the economic rationale for this legislation? A A monopolist produces too little of the good, producing an output that minimizes the average cost of production. B A monopolist produces too little of the good, charging consumers a price that exceeds the marginal cost of production. C A monopolist is more likely to pollute the environment than are firms in a competitive industry. D A monopolist engages in price discrimination, charging low-income people with elastic demand curves a higher price than that charged to high-income people with inelastic demand curves. E A monopolist produces too much of a good, attracting scarce factors of production that might be better utilized in other industries.
A
Assume both Italy and Greece produce only two goods: wine and olive oil. If Italy holds a comparative advantage in the production of wine, then which of the following statements is NOT true? (A) Italy must hold an absolute advantage in the production of wine. (B) Greece holds a comparative advantage in the production of olive oil. (C) Italy's opportunity cost of producing one additional unit of wine is lower than Greece's. (D) Greece's opportunity cost of producing one additional unit of olive oil is lower than Italy's. (E) If trade is open between them, these countries have an incentive to trade.
A
If the firm increases its capital and decreases its labor and produces the same amount of bundt cakes, what happens to the marginal product of capital (MPK) and the marginal product of labor (MPL) A) (MPK) decreases and (MPL) increases B) (MPK) increases and (MPL) doesn't change C) (MPK) doesn't change and (MPL) increases D) (MPK) doesn't change and (MPL) decreases E)(MPK) increases and (MPL) decreases
A
In which of the following situations is a good NOT scarce? (A) Consumers give up nothing to obtain more of the good. (B) Consumers can purchase as much of the good as they want at its current market price. (C) Large quantities of the good are available in the marketplace. (D) There is a surplus of the good at some positive price. (E) There is a shortage of the good at some positive price.
A
Which of the following would increase demand for a normal good? A decrease in A) the price of a complement. B) the price of a substitute. C) consumer taste for a good. D) income E) price
A
A technological advance in textbook production will lead to which of the following? A) an increase in textbook supply B) a decrease in textbook supply C) a movement along the supply curve for textbooks D) an increase in textbook demand E) an increase in textbook prices
A, technology is a supply shifter
A perfectly competitive producer of steel rods and steel beams employs 100 workers with identical skills. If steel rods and steel beams sell for the same price, which of the following rules should the producer always follow to use the 100 workers efficiently? Allocate workers so that the average cost of producing beams equals the average cost of producing rods. Allocate workers so that the marginal product of labor is the same in both rod production and beam production. Allocate half the workers to rod production and half the workers to beam production. A I only B II only C III only D II and III only E I, II, and III
B
According to the law of diminishing marginal utility, which of the following is true? (A) Total satisfaction decreases as more units of a good are consumed. (B) The additional satisfaction received from consuming extra units of a good decreases as consumption of the good increases. (C) The additional satisfaction received from consuming extra units of a good decreases as consumption of the good decreases. (D) The additional satisfaction received from consuming extra units of a good increases as consumption of the good increases. (E) When marginal utility is decreasing, total utility is decreasing.
B
Assume that consumers consider popcorn and pretzels to be substitutes. A significant decrease in the supply of popcorn will affect the pretzel market by (A) increasing the demand for pretzels and therefore the supply of pretzels (B) increasing the demand for pretzels and therefore the price of pretzels (C) decreasing the demand for pretzels and therefore the price of pretzels (D) increasing the supply of pretzels and therefore the price of pretzels (E) decreasing the supply of pretzels and therefore the price of pretzels
B
Following a prolonged power outage, the price of flashlights normally increases significantly. If cities had passed laws prohibiting price increases for flashlights, during power outages such laws would most likely (A) make flashlights more available (B) create a shortage of flashlights (C) shift the demand curve for flashlights to the right (D) shift the supply curve for flashlights to the left (E) have no effect on the availability of flashlights
B
If an increase in income leads to a decrease in demand, the good is A) abnormal B) inferior C) a substitute D) normal E) a complement
B
In the current labor market, suppose that the wage rate for accountants is significantly higher than the wage rate for economists. In the long run, if you observed that the wage rate for economists rose while the wage rate for accountants fell, which of the following would best explain your observation? A The supply of economists must have increased, and the supply of accountants must have decreased. B The supply of economists must have decreased, and the supply of accountants must have increased. C The demand for economists must have increased, and the supply of accountants must have decreased. D The demand for economists must have decreased, and the supply of accountants must have increased. E The demand for both economists and accountants must have decreased.
B
Which of the following is most likely to increase the supply of soldiers for an all-volunteer army? A A decrease in the salaries paid to soldiers B A decrease in the average wage rate in civilian employment C A reduction in college tuition benefits provided by soldiers D The imposition of new restrictions on women in the military E An increase in the required length of service
B
Which of the following is most likely to occur when a competitive market adjusts from one equilibrium to another? A A decrease in demand will cause the equilibrium price, equilibrium quantity, and total surplus to increase. B An increase in demand will cause the equilibrium price, equilibrium quantity, and producer surplus to increase. C A decrease in supply will cause the equilibrium price to decrease, the equilibrium quantity to increase, and consumer surplus to decrease. D An increase in supply will cause the equilibrium price to increase, the equilibrium quantity to decrease, and consumer surplus to increase. E A decrease in supply and increase in demand will cause the equilibrium quantity to decrease but the equilibrium price to be indeterminate.
B
Which of the following will occur if consumers expect the price of a good to fall in the coming months? A) No change will occur today. B) Demand will decrease today. C) The quantity demanded will rise today. D) Demand will increase today. E) The quantity demanded will remain the same today.
B
At her current level of consumption, a consumer is willing to pay up to $1.50 for a bottle of water and up to $1,500 for a diamond ring because the (A) total utility of diamond rings is greater than the total utility of water (B) total utility of water is less than the marginal utility of a diamond ring (C) marginal utility of a bottle of water is less than the marginal utility of a diamond ring (D) marginal utility of a bottle of water is greater than the marginal utility of a diamond ring (E) consumer is irrational and does not understand that water is more important than a diamond
C
If a severe drought destroys a significant portion of the peanut crop and peanut farmers' revenues increase, which of the following is true over the observed range of prices? (A) The demand for peanuts must be unit price elastic. (B) The demand for peanuts must be price elastic. (C) The demand for peanuts must be price inelastic. (D) The supply of peanuts must be price inelastic. (E) The supply of peanuts must be price elastic.
C
If the only two firms in an industry successfully collude to maximize their joint profit, the price for the product will be A equal to the marginal cost of production B equal to the average total cost of production C above the marginal cost of production D above the monopoly price E below the average variable cost of production
C
Promoters of a rock group know that if they charged $8 a ticket, 400 people would buy tickets for a concert, and if they charged $4 a ticket, 800 people would buy tickets. Over this price range, the demand for the concert tickets for the rock group is (A) elastic (B) inelastic (C) unit elastic (D) perfectly elastic (E) perfectly inelastic
C
Which of the following best defines opportunity cost? (A) It is the cost of producing those goods most desired by a given economy. (B) It is the cost of the input mix that will lead to the greatest rate of growth for a given company. (C) It is the amount of one product that must be given up in order to produce an additional unit of another product. (D) It is the use of the least-cost method of production. (E) It is the cost of labor used in the production process.
C
Which of the following best describes marginal cost? A) The cost of producing a typical unit of output B) The costs that do not vary as output changes C) The cost of producing one more unit of output D) The costs that vary as output changes, per unit of output E) The costs that do not vary as output changes, per unit of output
C
Tuma Unlimited produces noodles in a perfectly competitive market. Its average total costs, marginal costs, and average variable costs have all decreased, but its average fixed costs haven't changed. Which of the following would cause these changes? A) a subsidy on fixed costs B) a tax on fixed costs C) a tax on variable costs D) an improvement in productivity E) an increase in fixed costs
D
Which of the following would most likely result in a decrease in the equilibrium price of oranges? (A) The weather during this orange-growing season is not as good as it was last year. (B) The price of apples, a substitute for oranges, is higher this year than last year. (C) New studies suggest that oranges contain traces of cancer-causing substances due to pesticide residue. (D) A tree-killing fungus spreads through orange orchards across the country. (E) Firms in the orange industry launch an effective advertising campaign.
C
If labor is the only variable input in the production process, the short-run marginal cost curve is upward sloping because which of the following occurs as more and more labor is added? (A) Output decreases, and thus marginal cost increases. (B) Output increases, and thus marginal cost increases. (C) Output increases at an increasing rate, and thus the cost of producing each additional unit of output increases. (D) Output increases at a decreasing rate, and thus the cost of producing each additional unit of output increases. (E) Output increases at a decreasing rate, and thus the cost of producing each additional unit of output decreases.
D
The demand curve for a normal good slopes down for which of the following reasons? I. An increase in the price of the good induces consumers to purchase substitute products. II. An increase in the price of the goods reduces consumers' purchasing power. III. An increase in the price of the good increases consumers' utility from consuming that good. A I only B II only C. III only D I and II only E I and III only
D
Assume that Clark spends his entire income on the purchase of two goods, X and Y. If his income and the prices of good X and Y all double, Clark will (A) double the purchase of goods X and Y (B) buy more of good X and less of good Y (C) buy less of good X and more of good Y (D) buy less of both goods X and Y (E) buy the same amounts of goods X and Y
E
If total revenue is increasing as output increases, marginal revenue is always (A) equal to average revenue (B) less than average revenue (C) increasing (D) decreasing (E) greater than zero
E
Suppose that you prefer reading a book you already own to watching videos and that you prefer watching videos to listening to music. If these are your only three choices, what is the opportunity cost of reading? A) the price of the book B) sleeping C) listening to music D) watching videos and listening to music E) watching videos
E
The price of an airline ticket is typically lower if a traveler buys the ticket several weeks before the flight's departure date rather than on the day of departure. This pricing strategy is based on the assumption that A travelers are not aware of how airline prices change across time B travelers do not have alternative modes of transportation C travelers will pay any price to travel as the departure date approaches D the marginal cost of the last few seats on an airplane is higher than that for the first few seats E travelers' demand becomes less elastic as the departure date approaches
E
Which of the following explains why a production possibilities curve is often represented as concave (bowed out) from the origin? (A) The law of demand (B) The law of supply (C) Constant returns to scale (D) Decreasing opportunity cost (E) Increasing opportunity cost
E
Which of the following is a way to avoid diminishing marginal returns to labor? A) Reduce the size of plant and equipment B) Reduce the amount of natural resources available C) Increase the population D) Increase the amount of labor used E) Increase the quantity of capital
E
Which of the following is true in a competitive market? there are many buyers and sellers A ) each firm sells a different variety of the product B ) buyers can influence the market price C ) sellers can influence the market price D ) all of the above E ) there are many buyers and sellers
E
Which of the following is associated with a command economy? A Competitive product markets B Use of resources for private gain C Use of available resources to meet all the needs and wants of its citizens D Entry of firms into industries with economic profit E Public ownership of the means of production
E. In a command economy, resources are publicly owned, and their uses are determined by a central planning agency.