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