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AP Micro 1-4 Review
AP Micro 1-4 Review
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1
Which of the following is correct regarding the four market structures?
Perfectly competitive firms & monopolies = price takers
Monopolies & monop. competitive firms = price makers
Game theory is used in all market structures to set price
All market structures produce where price = marginal cost
2
What's an opportunity cost?
Paying someone
When you have a choice to do or buy one thing or another
PAY DAY!
When you have to buy one thing
3
Given this model of a price floor, producer surplus would be
Area A+B+C+D+E
Area D+E
Area B+C
Area A
4
To maximize profit how many should this firm produce?
$12
2
4
$10
5
What is normal profit?
Fixed Costs + Variable Costs
Total Revenue - (Explicit + Implicit Costs)
Total Revenue - Explicit Costs
Zero Economic Profit
6
What is the marginal product of the 3rd worker?
-6
6
-4
4
7
On this short run cost curve graph, what does curve X represent?
Avg Total Cost
Avg Variable Cost
Marginal Cost
Avg Fixed Cost
8
What is the
profit per unit
when this firm sets a production level to maximize profit?
$1
$42
$6
There is no profit. Operating at a loss of $6 per unit.
9
Calculate the consumer surplus given the graph
6
24
11
3
10
On this short run cost curve graph, what does curve Y represent?
Avg Total Cost
Avg Fixed Cost
Marginal Cost
Avg Variable Cost
11
This graphic is modeling what?
the relationship between price controls and the government
the relationship between substitue goods
a change in quantity demand and a change in demand
the relationship between complimentary goods
12
According to this model what is true about the firm?
It is making zero economic profit.
Total Revenue is $23
Total Cost is $23
To maximize profit the firm should produce 15.
13
Fixed costs are:
the costs of producing one more unit of capital
average cost multiplied by the firm's output
usually zero when a firm produce nothing
any cost which doesn't change when a firm changes its output
14
to Figure B. The marginal cost of producing the 4th output is:
$6
$13.50
$ 54
$1.50
15
To maximize consumer surplus government should set a price ceiling for this firm
at P2.
at P1.
at Q1.
at P3.
16
The Law of Demand- There is a(n) _______ relationship between price and quantity demanded.
individual
indecent
direct
inverse
17
Which of the following occurs when a profit maximizing monopoly is subject to a lump sum tax?
The consumer surplus would get smaller
Price will increase but quantity will stay the same
Price and quantity will stay the same
Price will increase and quantity will decrease
18
According to this graph this firm is
should shut down production.
operating at a profit of $1 per unit.
operating at a profit of $10 per unit.
operating at a loss of $10 per unit.
19
What is the opportunity cost of increasing production of clothing from 1 to 2?
1 Clothing
C
B
5 Food
20
According to this graph, if this firm sells 1 more item what is the marginal revenue?
MR=MC
10/Q
Indeterminent
$10
21
On this short run cost curve graph, where would you find the Avg Fixed Cost?
sum of MC and AVC
distance bw ATC and MC
sum of MC and AVC
vertical distance bw ATC and AVC
22
For a non-price discriminating monopoly, the marginal revenue is
less than the price
negative when the firm is maximizing profit
equal to the price
increasing at a constant rate
23
What are the factors of production?
Capital, entrepreneurship, Laziness, Nothing
Donald Trump
Land, Labor
Land, Labor, Capital, entrepreneurship
24
What is the definition of economics?
study of resources and allocation
study of choices
all of the above work just fine
study of scarcity
25
To maximize profit how many should this firm produce?
6
$42
7
$36
26
Which of the following will cause the
quantity demanded
of milk to decrease?
A decrease in the price of a complementary good
A decrease in income assuming that milk is a normal good
Increase in the price of a substitute
An increase in the price of milk
27
If both supply and demand shift what is the rule?
The equilibrium price and quantity will increase
Price doesn't shift the curve
The new equilibrium price or quantity will be indeterminate
The new equilibrium price and quantity will be indeterminate
28
A price control does what to a market?
creates dead weight loss
reduces shortages
balances the market fairly
makes it more efficient
29
In order to maximize profit this firm should choose to produce how many?
5
0
8
$4
30
to Figure B. The marginal cost of producing the 1st output is:
$6
$1.50
$9
$ 54
31
Which of the following is correct?
Firm 1's dominant strategy is to price low
Firm 2's dominant strategy is to price high
Firm 2's dominant strategy is to price low
Firm 1's dominant strategy is to price high
32
Identify deadweight loss on this monopoly graph
BCJ
ADG
ACF
ABE
33
What is marginal revenue when price is $2?
$12
$32
$-4
$-1
34
Which is not a characteristic of a firm in a monopoly market structure?
low barriers to entry
the firm is the market
unique product (no close substitutes)
"Price Maker"
35
The marginal product of the sixth worker is
negative
15 units of output
30 units of output
180 units of output
36
Monopolies are able to make economic profit in the long run because
they have barriers to entry
they can price discriminate
the demand curve is greater than the MR
they have inelastic demand curves
37
Why would someone not value the 5th or 6th purchase of the same item as much as the 1st?
income effect
# of consumers
the law of diminishing marginal utility
substitution effect
38
Assume a perfectly competitive market and price of $35. How many should they produce?
3 boxes
2 boxes
4 boxes
1 box
39
At which point on this graph would you see the firm becoming too big and difficult to manage?
Point A
Point B
40
After which worker does diminishing marginal returns set in?
6th worker
5th worker
3rd worker
2nd worker
41
How do you calculate economic profit?
Total Revenue - Explicit Costs
Price x Quantity
Total Revenue - (Explicit + Implicit Costs)
Fixed Costs + Variable Costs
42
Which of the following will cause the
demand
for milk to decrease?
A decrease in income assuming that milk is a normal good
Increase in the price of a substitute
A decrease in the price of milk
A decrease in the price of a complementary good
43
Which of the following best characterizes monopolistic competition?
Small number of firms and efficiency
Low barriers to entry and differentiated products
Large number of firms with high barriers to entry
Large number of firms with identical products
44
With a price-discriminating monopolist, all of the following would occur EXCEPT:
The monopoly would charge all consumers higher prices
The consumer surplus would be zero
The demand would equal the MR
There would be no dead-weight loss
45
Economic profit
takes into account implicit and explicit costs.
=TR-TC
=ATC-AVC
Green means go
46
If gov't regulates a natural monopoly with price ceiling where the MC = Demand, then
monopoly will produce the productively efficient quantity
monopoly will produce the socially optimal quantity
monopoly will break even and make no economic profit
consumer surplus will decrease
47
What is the marginal utility of the 3rd slice of bread?
price doesn't shift the curve
20
40
130
48
The Red Zone represents
Increasing Marginal Returns
Negative Marginal Returns
Decreasing Marginal Returns
Green means GO
49
Point X in this graph is showing
Unemployed resources
Allocative efficiency
All of the above
a production possibility that is not possible
50
According to this model what can you say is true about the firm?
It's marginal revenue is 8.
This is an example of a firm in the short run.
It should not produce and shut down.
It is operating at a loss.
51
Which describes the situation where competitors collude and agree to set prices?
Game theory
Excess capacity
Cartel model
Collusive competition
52
The model shown depicts
a price ceiling
a price floor
a shortage
an efficient market
53
What of the following is
NOT
true for this firm?
If they maximize profit TR will be $90.
They should produce 6 to maximize profit.
Marginal revenue is $15.
They are operating at a profit.
54
Refer to Figure A. With which worker does the Law of Diminishing Marginal Returns first set in?
2nd
3rd
1st
4th
55
The total variable cost of producing 4 units is:
$54
$30
$24
$6
56
Law of Suppy- There is a(n) __________ relationship between price and quantity demanded
inverse
indirect
decent
direct
57
Which of the following is true for monopolistically competitive firms in long run equilibrium?
Price equals MC
Firms are maximizing total revenue
They are productively efficient
Price equals ATC
58
What is the economic term to describe point A?
Economies of Scale
Diseconomies of Scale
59
At which point on this graph would you see mass production techniques being used?
Point B
Point A
60
See below:
1 hour
4 hours
3 hours
2 hours
61
When quantity demanded is greater than quantity supplied at a given price
dead weight loss
marginal
shortage
surplus
62
The engineering knowledge that goes into the production of prosthetics is an example of
Labor
Human Capital
Physical Captial
Land
63
The Green Zone represents
Negative Marginal Returns
Decreasing Marginal Returns
Increasing Marginal Returns
Green means GO
64
Calculate the producer surplus given the graph
11.5
8.5
24.1
1.5
65
Identify consumer surplus on this monopoly graph
BCJ
ADG
ACF
ABE
66
The acronym that means price, demand & marginal revenue are the same in perfect competition:
Mr. DARP
Productive efficiency
MR = MC
Allocative efficiency
67
Which is
NOT
a characteristic of a firm that is in a monopolisticly competitive market?
some control over price
a lot of non-price competition (advertising)
identical products
relatively large number of sellers
68
This firm...
is in long run equilibrium.
is operating at a loss.
should shut down.
is operating at a profit.
69
How many will this firm choose to produce to maximize profit after a shift in supply?
5
6000
8
5000
70
You recently get a raise and your income increases. What will happen?
Price doesn't shift the curve.
Your supply of steak (a normal good) will increase
Your demand for ramen (an inferior good) will increase
Your demand for steak (a normal good) will increase
71
In the production of Pizza, new crust making tech is created. What will happen?
quantity supplied increases
Demand increases
(in best pirate voice) PRICE DOESN'T SHIFT THE CURVE!
supply increases
72
North Korea choses to devote many of its resources to the development of its military and nuclear weapons.
This is an example of a guns vs butter issue
This is an example of a negative statement
None of the above
This is an example of ceteris peribis
73
Consumer surplus is indicated by which colored area?
Blue
Green
Grey
White
74
In microeconomics, the short run is defined as which of the following?
a period between 1-4 years
a period less than one year
a period during which some inputs cannot be changed
a period where fixed costs are greater than variable costs
75
At the point of price A, economic profits are
ABJG
ACMG
ABKH
ABLI
76
Scarcity is defined as...
Opportunity Cost
Unlimited wants, but limited resources
The kitty is cute
Wants and needs
77
What is total revenue when price is $3?
$0
$6
$9
MR=MC
78
If left unregulated, this monopoly firm will set price at?
P3
P2
P1
Mr. DARP
79
If the monopoly shown is maximizing profit, which of the following is true?
Profit is $200
Firms will enter in the long run
Total revenue is $960
Total cost is $600
80
If four large firms sell similar products and use non-price competition, which is true?
The market is monopolistically competitive
The market is perfectly competitive
The firms are interdependent
The firms are efficient
81
Which of the following is NOT a factor of production?
Labor
Capital
Land
Goods and Services
82
Which is NOT a characteristic of a firm in a perfectly competitive market structure?
identical products
the firms are "Price Takers"
the firm is the market
low barriers of entry
83
The vertical distance between ATC and AVC reflects:
the law of diminishing returns
marginal cost at each level of output
the average fixed cost at each level of output
total cost
84
The Yellow Zone represents
Negative Marginal Returns
Decreasing Marginal Returns
They call me Mello Yello....
Increasing Marginal Returns
85
According to the graph, if a firm wanted to maximize
revenue
they should produce how many?
8
12
1
0. They should shut down production.
86
In order to maximize profit this firm should produce how many?
7
9
None
8
87
Which of the following would cause the PPF to shift to the right?
Cheaper Artificial Intelligence allows for industries to be more productive
None of the above
A war happens and most of society is left without electricity
The government choses to produce more consumer goods
88
To maximize total revenue, a monopolist producing in elastic range of its demand curve should
decrease its output
produce where the MR is negative
produce at the minimum point of the ATC curve
produce where the MR is zero
89
In this graph:
point Y
indicates
Efficient point
Scarcity of resources
Inefficient point
Unattainable point
90
To maximize profit this firm's
cost per unit
will be?
produce 5
$50 per unit
$4 per unit
$5 per unit
91
You recently get a raise and your income increases. What will happen?
Price doesn't shift the curve.
Your supply for Spam (an inferior good) will increase.
Your demand for Tesla cars (a normal good) will decrease.
Your demand for Spam (an inferior good) will decrease.
92
According to the graph, at what production level would be in the inelastic range of demand?
1
12
None. All elastic.
7
