Which of the following is always true of the relationship between average and marginal costs?

AVC is increasing when MC is higher than AVC.

Based on the information, and assuming no cooperation, which of the following statements is true?

Both companies have an incentive to reduce production by 10%.

Which is true of a price floor?

The intention of the policy is to assist producers.

Helena quit her job earning $75,000 to start a laser tag arena with revenue of $175,000 and costs of $125,000.

Accounting profit is $50,000 and economic profit is -$25,000.

If the price offered in the market is currently $1.50, ...

Quantity demanded will fall and quantity supplied will rise.

Point M on the graph is...

Achievable through specialization and trade.

Which of the following outcomes will result from the collusion between a good's main producers?

Price Increase, Quantity Decrease

If both demand and supply increase...

Price is Indeterminate, Quantity Increases

Price discrimination is...

charging different rates for the same good.

A pure public good is...

Non-Rivalrous and Non-Excludable in Consumption

P = MC and at Long Run Equilibrium, in a competitive market. Which of the following is not true?

The firm is earning economic profit

To minimize costs, the firm should change the hiring of capital and labor in which of the following ways?

Increase the amount of capital and decrease the amount of labor.

Max can use his farm land to produce wine or cotton. Which is true based on the graph?

A change in the market price of wine could cause Max to move from C to B.

Which is true for a monopoly but not a perfectly competitive firm?

The firm faces a downward sloping demand curve.

The shape of production function pictured represents...

Diminishing marginal returns of additional units of labor

Marginal revenue product is defined as...

Change in total revenue from additional unit of input.

A monopoly's marginal revenue curve...

Is downward sloping beneath the demand curve

Which scenario best fits the graph pictured in the market for sugar, a normal good?

A decrease in the price of Splenda.

If a firm's Long Run Average Total Cost is increasing as output increases...

The firm is experiencing diseconomies of scale.

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AP MICRO REVIEW

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Questions 42

Answers

1
Which of the following is always true of the relationship between average and marginal costs?
MC is increasing when AVC is above MC.
AVC is increasing when MC is increasing.
ATC is increasing when MC is increasing.
AVC is increasing when MC is higher than AVC.
2
Based on the information, and assuming no cooperation, which of the following statements is true?
Only UA has an incentive to reduce production by 20%.
Only UB has an incentive to reduce production by 20%.
Both companies have an incentive to reduce production by 10%.
Both companies have an incentive to reduce production by 20%.
3
A government tax on the production of cars will...
Shift the demand curve left
Shift the supply curve left
Shift the supply curve right
Shift the demand curve right.
4
Which is true of a price floor?
The price floor is binding when set below equilibrium
The policy will increase quantity demanded.
The intention of the policy is to assist producers.
The policy will create a shortage of the good.
5
The government regulation pictured in the market for Good X would...
Have no effect.
Induce increased production of Good X.
Create a shortage of Good X.
Create a surplus of Good X.
6
Helena quit her job earning $75,000 to start a laser tag arena with revenue of $175,000 and costs of $125,000.
Her accounting profit is $100,000 and economic profit is $50,000.
Her accounting profit is -$25,000 and economic profit is $50,000.
Accounting profit is $100,000 and economic profit is -$25,000.
Accounting profit is $50,000 and economic profit is -$25,000.
7
If the price offered in the market is currently $1.50, ...
Quantity demanded and quantity supplied will both rise
Quantity demanded and quantity supplied will both fall
Quantity demanded will rise and quantity supplied will fall
Quantity demanded will fall and quantity supplied will rise.
8
The marginal product of the third worker is...
18
25
5
7
9
Based on the graph, which policy action would an economist suggest?
A corrective tax
A corrective subsidy
No action. Let the market correct itself.
A binding price ceiling
10
Point M on the graph is...
Inefficient
Achievable without specialization and trade.
Achievable through specialization and trade.
Impossible
11
Identify the point at which monopoly produces at the socially optimal level:
Not Pictured
A
C
B
12
If the World Price of good X is C, then the nation represented is ______ in the market for X.
a closed country
neither an exporter or an importer
an Importer
an Exporter
13
In the inelastic portion of the demand curve, an increase in price will...
Shift the demand curve
Increase revenue
Decrease revenue
Not affect revenue
14
The firm pictured currently employs 4 workers. The firm should...
Do nothing.
Hire an additional worker
Fire two workers.
Fire one worker.
15
Who would NOT support the policy pictured?
Domestic Suppliers
The Government
Domestic Buyers
Trade Unions
16
A tax system that requires citizens to pay higher rates as they earn more is considered...
Progressive
Proportional
Regressive
Lump Sum
17
Which of the following outcomes will result from the collusion between a good's main producers?
Price Increase, Quantity Increase
Price Decrease, Quantity Decrease
Price Increase, Quantity Decrease
Price Decrease, Quantity Increase
18
If both demand and supply increase...
Price decreases, Quantity is Indeterminate
Price is Indeterminate, Quantity Increases
Price increases, Quantity Increases
Price Decreases, Quantity Decreases
19
Households are _________ in the goods market and _________ in the factor market
Suppliers, Suppliers
Demanders, Suppliers
Demanders, Demanders
Suppliers, Demanders
20
Price discrimination is...
Increases dead weight loss.
charging different rates for the same good.
practiced by perfectly competitive firms.
illegal under anti-trust laws.
21
A pure public good is...
Rivalrous and Non-Excludable in Consumption
Provided in socially optimal quantities by private market
Rival and Excludable in Consumption
Non-Rivalrous and Non-Excludable in Consumption
22
P = MC and at Long Run Equilibrium, in a competitive market. Which of the following is not true?
There is productive efficiency
The firm is earning economic profit
There is no deadweight loss
The firm is allocatively efficient
23
To minimize costs, the firm should change the hiring of capital and labor in which of the following ways?
Decrease the amount of capital and increase the amount of labor.
Increase the amount of capital and increase the amount of labor.
Decrease the amount of capital and decrease the amount of labor.
Increase the amount of capital and decrease the amount of labor.
24
Max can use his farm land to produce wine or cotton. Which is true based on the graph?
A change in the market price of wine could cause Max to move from C to B.
Producing at point A is preferable to points B or C.
A movement from point A to B has the same tradeoff as from B to C.
Changes in consumer demad away from wine will cause Max's PPC to shift in.
25
In the long run, firms will...
Enter the market
Differentiate their products
Earn a perpetual economic profit
Exit the Market
26
Which is true for a monopoly but not a perfectly competitive firm?
The firm's Marginal revenue curve = its demand curve.
The firm produces where MR = MC
The firm earns 0 economic profit in the long run.
The firm faces a downward sloping demand curve.
27
A bowed outward production possibilities frontier represents...
Two goods that utilize identical resources
Inefficient production
An increasing opportunity cost
A constant opportunity cost
28
Allowing markets to achieve equilibrium...
Creates DWL
Creates a surplus
Ensures high prices
Maximizes Surplus
29
A competitive firm's market price is at Point B. In the short run, the firm...
Will produce
May or may not produce.
Will not produce
Will exit the market
30
How many workers should the firm hire, if the wage rate is $20 and sandwiches are sold for $0.50?
4
7
2
5
31
The shape of production function pictured represents...
Constant returns of additional units of labor
An economy of scale
Declining average total costs
Diminishing marginal returns of additional units of labor
32
Identify the correct market structure:
Monopoly
Monopolistic Competition
Oligopoly
Perfect Competition
33
The cross-price elasticity of Good X and Good Y is positive. These goods are...
Substitutes
Elastic
Unrelated
Complements
34
Good X has an income elasticity of -2. Good X is a(n)
Inferior good
Complementary good
Luxury good
Normal good
35
Marginal revenue product is defined as...
Change in total cost resulting from added labor.
Change in total revenue from additional unit of input.
Total revenue devided by quantity of labor employed.
Change in total revenue from additional production.
36
A monopoly's marginal revenue curve...
Is downward sloping beneath the demand curve
Is perfectly elastic
Is identical to the firm's demand curve
Is upward sloping above the demand curve
37
A perfectly competitive firm's demand can best be described as...
inelastic
elastic
perfectly inelastic
perfectly elastic
38
Assume that the supply of corn is relatively inelastic and the demand for corn is relatively elastic. A tax will...
entirely on sellers
equally on buyers and sellers
more on sellers than on buyers
more on buyers than on sellers
39
Based on the graph, which policy action would an economist suggest?
A binding price floor
No action. Let the market correct itself.
A corrective tax
A corrective subsidy
40
Which scenario best fits the graph pictured in the market for sugar, a normal good?
Increased popularity of cupcakes.
A decrease in the price of Splenda.
An increase in income.
Decreased price of labor at the Soda factory
41
A monopolist is pricing at their profit maximizing point. If the firm increased its production by one unit...
There would be more deadwight loss.
It would earn less revenue
It would enter the inelastic region of the demand curve
MR would be less than MC.
42
If a firm's Long Run Average Total Cost is increasing as output increases...
The firm is experiencing diseconomies of scale.
The firm should increase production.
The firm is experiencing an economy of scale.
The firm is maximizing efficiency.

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