AP Micro Midterm - Assignment Essays

question

The fast food industry has a structure of monopolistic competition. What is one important feature of this market structure?*

A. One large firm controls prices in the market.
B. A few large firms fix prices and control the market
C. A few large firms are interdependent and engage in frequent price wars
D. Firms with many similar products depend on product differentiation, or branding.

answer

D. Firms with many similar products depend on product differentiation, or branding.

question

College students living off-campus frequently consume large amounts of ramen noodles and boxed macaroni and cheese. When they finish school and start their careers, their consumption of these goods frequently declines. This suggests that ramen noodles and boxed macaroni and cheese are:
A) inferior goods.
B) normal goods.
C) complementary goods.
D) substitute goods

answer

A) inferior goods.

question

What is the situation called when firms in an industry reach an agreement to fix prices, divide up the market, or otherwise restrict competition?*

a. interindustry competition
b. incentive to cheat
c. price leadership
d. collusion

answer

d. collusion

question

Which of the following is a characteristic of Monopolistic Competition?*

Economically efficient in the long run
pricing at minimum ATC in long run
Excess capacity
Very few competitors
Most dominant market structure in United States

answer

Excess capacity

question

Which is a normative economic statement?*

a. The consumer price index rose 1.2 percent last month
b. The unemployment rate of 6.8 percent is too high
c. The average rate of interest on loans is 4.6 percent
d. The economy grew at an annual rate of 3.6 percent

answer

b. The unemployment rate of 6.8 percent is too high

question

The private ownership of property resources and the use of markets and prices to direct and coordinate economic activity are characteristic of*

a. socialism
b. communism
c. a market economy
d. a command economy

answer

c. a market economy

question

The law of supply states, other things being constant, as price increases,

a. supply increases
b. supply decreases
c. quantity supplied increases
d. quantity supplied decreases

answer

c. quantity supplied increases

question

If the quantity supplied of a product is greater than the quantity demanded for that product, then*

a. there is a shortage of the product
b. there is a surplus of the product
c. the product is a normal good
d. the product is an inferior good

answer

b. there is a surplus of the product

question

A study shows the coefficient of the cross elasticity of Coke and Sprite is negative. This information indicates that Coke and Sprite are*
a. normal goods
b. complementary goods
c. substitute goods
d. independent goods

answer

b. complementary goods

question

If a 2% fall in the price of a product causes the quantity demanded of the product to increase by 2%, demand is*

a. inelastic
b. elastic
c. unit-elastic
d. perfectly elastic

answer

c. unit-elastic

question

The opportunity cost of a new public stadium is the

a. money cost of hiring guards and staff for the new stadium
b. cost of constructing the new stadium in a future year
c. change in the real estate tax rate to pay off the new stadium
d. other goods and services that must be sacrificed to construct the new stadium

answer

d. other goods and services that must be sacrificed to construct the new stadium

question

In which market model are very large number of firms with identical products?*

a. monopolistic competition
b. oligopoly
c. monopoly
d. perfect competition

answer

d. perfect competition

question

Income elasticity of demand for is negative. This information indicates a/an*

a. normal good
b. inferior good
c. substitute
d. complement
Correct answer
b. inferior good

answer

b. inferior good

question

Direct, purchased, out-of-pocket costs paid to resource suppliers outside the firm are called*
3/3
A. Implicit cost
B. Explicit costs
C. Opportunity Costs
E. Marginal Costs

answer

B. Explicit costs

question

If the long-run average-total-cost curve (LRATC) for a firm is downsloping, this indicates that there*

a. is a minimum efficient scale
b. are constant returns to scale
c. are diseconomies of scale
d. are economies of scale

answer

c. are diseconomies of scale

question

Which triple identity results in the most efficient use of resources in perfect competition?*
0/3
P = MC = minimum ATC
b. P = AR = MR
c. P = MR = minimum MC
d. TR = MC = MR

answer

c. P = MR = minimum MC

question

Given the following graph, if the firm is producing at output level ON, the rectangle FECB is*
a. total variable cost
b. total fixed cost
c. total revenue
d. total economic profit

answer

d. total economic profit

question

If the supply curve moves from S to S2 on the graph below, there has been
a. an increase in supply
b. a decrease in supply
c. an increase in quantity supplied
d. a decrease in quantity supplied

answer

c. an increase in quantity supplied

question

Which of the following would cause the price of a good to increase above the equilibrium price and stay there permanently?*
0/3
a) taxes for producers increased
B) the price of a substitute product decreased
C) an effective price floor.
D) an effective price ceiling

answer

B) the price of a substitute product decreased

question

The demand curve for the pure monopolist is*
3/3
a. Perfectly price-elastic
b. Perfectly price-inelastic
c. downsloping
d. upsloping

answer

c. downsloping

question

If a business owner has a $150,000 accounting profit, and could have made exactly $50,000 in his next best business opportunity, he has earned*
0/3
a. $100,000 in economic profits
b. $150,000 in economic profits
c. $50,000 in economic profits
d. Neither an economic profit or loss
e. None of the above

answer

a. $100,000 in economic profits

question

Given the following table, the profit-maximizing output and price for this monopolist would be
a. 1 and $100
b. 2 and $200
c. 3 and $400
d. 4 and $300

answer

c. 3 and $400

question

What statement would best complete a short definition of economics? "Economics studies*
3/3
a. how businesses produce goods and services."
b. the equitable distribution of society's income and wealth."
c. the printing and circulation of money throughout the economy."
d. How individuals, institutions, and society make optimal choices under conditions of scarcity."

answer

d. How individuals, institutions, and society make optimal choices under conditions of scarcity."

question

Which cost curves do 1, 2, 3, and 4 represent in order from 4 to 1 ?
a. ATC, MC, AFC, AVC
b. MC, AFC, AVC, ATC
c. MC, ATC, AVC, AFC
d. AFC, MC, ATC, AVC
e. AFC, AVC, ATC, MC

answer

c. MC, ATC, AVC, AFC

question

A firm has total fixed costs of $4,000 a year. The average variable cost is $3.00 for 2,000 units of output. At this level of output, its average total costs are*
0/3
a. $2.50
b. $3.00
c. $4.50
d. $5.00

answer

d. $5.00

question

In the following graph, economic growth could be represented by
a. a movement from point A to point B
b. a movement from point B to point A
c. a shift in the production possibilities curve out to point D
d. a shift in the production possibilities curve out to point C

answer

d. a shift in the production possibilities curve out to point C

question

An effective price ceiling is characterized by:*
0/3
a) price set below the current market clearing price of the good.
B) a price set above the current market clearing price of the good
C) a shift of the demand curve
D) a shift of the supply curve

answer

a) price set below the current market clearing price of the good.

question

The demand schedule or curve confronted by an individual perfectly competitive firm is*
3/3
a. perfectly inelastic
b. inelastic but not perfectly inelastic
c. perfectly elastic
d. elastic but not perfectly elastic

answer

c. perfectly elastic

question

A Monopolistically Competitive firm is producing at an output level in the short run where average total cost is $3.50, price is $3.00, marginal revenue is $1.50, and marginal cost is $1.50. This firm is operating at*
3/3
a. with an economic loss in the short run
b. with an economic profit in the short run
c. at a breakeven level of output in the short run
d. at an inefficient level of output in the short run

answer

a. with an economic loss in the short run

question

In which market model is the individual seller of a product a price taker?*
0/3
a. perfect competition
b. pure monopoly
c. monopolistic competition
d. oligopoly

answer

a. perfect competition

question

Which would be studied in microeconomics?
3/3
a. the output of the entire US economy
b. the general level of prices in the US economy
c. the output and price of wheat in the United States
d. the total number of workers employed in the United States

answer

c. the output and price of wheat in the United States

question

The airline industry is controlled by a few companies whose pricing decisions are interdependent. This market is an example of which type of market structure?*
3/3
A. monopoly
B. oligopoly
C. monopolistic competition
D. perfect competition

answer

B. oligopoly

question

Which of the following statements is positive?*

(A)An economy that produces more butter than guns is better off than an economy that produces more guns than butter
(B) Nations should concentrate their resources on producing wholesome consumer goods as
(C)The production possibilities frontier is concave to the origin because of the law of increasing costs.
(D)Nations ought to devote at least some of their resources to national defense.
(E) Nations would do better by producing toward the middle of their production possibilities frontiers as opposed to the extreme points near the axes

answer

(C)The production possibilities frontier is concave to the origin because of the law of increasing costs.

question

What is a rational economic decision:*

One in which there are no opportunity costs
One in which benefits are unknown but costs are low
One in which marginal benefits are greater than marginal costs
One in which marginal costs are greater than marginal benefits

answer

One in which marginal benefits are greater than marginal costs

question

The opportunity cost of an action is*
0/3
(A) the monetary payment the action required.
(B) the total time spent by all parties in carrying out the action.
(C) the value of the opportunity or opportunities that must be sacrificed in order to take the action.
(D) the cost of all alternative actions that could have been taken.

answer

question

Which is a normative economic statement?*

(A) A decrease in price leads to an increase in quantity demanded.
(B) The temperature outside is 90 degrees.
(C) Economics is more difficult than history.
(D) People will buy less butter at $1.50 per pound than they will at $1 per pound.

answer

question

In the circular flow model, businesses*

a. buy products and resources
b. sell products and resources
c. buy products and sell resources
d. sell products and buy resources

answer

d. sell products and buy resources

question

Macroeconomics focuses on*

(A) government and its laws that affect commerce
(B) individuals and their resource use
(C) corporations and their production levels
(D) the resource use of the entire nation
(E) money

answer

(D) the resource use of the entire nation

question

Consumers' willingness and ability to buy a good or service at a different price that exist in a market is called*

Supply
Elasticity of supply
Demand
Elasticity of demand

answer

Demand

question

The law of supply says that:*

The lower the price, the more producers will supply
The higher the price, the more producers will supply
The lower the price, the more consumers will buy
The higher the price, the more consumers will buy

answer

The higher the price, the more producers will supply

question

The minimum wage is an example of:*

a price floor that creates a shortage
a price floor that creates a surplus
a price ceiling that creates a shortage
price ceiling that creates a surplus

answer

a price floor that creates a surplus

question

If the government subsidizes the production of halogen headlights,*

The demand curve will shift to the left
The demand curve will shift to the right
The supply curve will shift to the left
The supply curve will shift to the right

answer

The demand curve will shift to the left

question

If average households income rises and observe that the demand for pork chops increases, pork chops must be:*

An inferior good
A normal good
A surplus good
A necessity

answer

A normal good

question

A decrease in demand is depicted by a:*

move from point x to point y.
shift from D1 to D2.
shift from D2 to D1.
move from point y to point x.
no movement at all

answer

shift from D2 to D1.

question

Which is a characteristic of a product whose demand is elastic?*

the price elasticity coefficient is less than 1
Total revenue decreases if price decreases
Buyers are relatively insensitive to price changes
The percentage change in quantity is greater than the percentage change in price

answer

The percentage change in quantity is greater than the percentage change in price

question

If a business increased the price of its product from $7 to $8 when the price elasticity of demand was inelastic, then*

total revenues decreased
total revenues increased
total revenues remained unchanged
total revenues were perfectly inelastic

answer

total revenues increased

question

The reason for the law of demand can be best explained in terms of*

supply
complementary goods
the rationing function of prices
diminishing marginal utility

answer

diminishing marginal utility

question

If two products, A and B, are complements, then*

an increase in the price of A will decrease the demand for B
an increase in the price of A will increase the demand for B
an increase in in the price of A will have no significant effect on the price of B
a decrease in the price of A will decrease the demand for B

answer

...

question

Assume that the price of video game players falls. What most likely will happen to the equilibrium price and quantity of video games, assuming this market is competitive?*

Price will increase; quantity will decrease
Price will decrease; quantity will increase
Price will decrease; quantity will decrease
Price will increase; quantity will increase

answer

Price will increase; quantity will increase

question

If the supply curve moves from S to S2 on the graph below, there has been*

an increase in supply
a decrease in supply
an increase in quantity supplied
a decrease in quantity supplied

answer

an increase in supply

question

If two goods are substitutes for each other, an increase in the price of one will necessarily*

decrease the demand for the other
increase the demand for the other
decrease the quantity demanded of the other
increase the quantity demanded of the other

answer

increase the demand for the other

question

Which change will decrease the demand for a product?*

a favorable change in consumer tastes
an increase in the price of a substitute good
a decrease in the price of a complementary good
a decrease in the number of buyers

answer

a decrease in the number of buyers

question

Which of the following is true?*
0/2
a. TC = TVC + TFC
b. TFC = TC at all levels of output
c. AVC + AFC = TC
d. MC = TC - TFC
e. ATC = AVC + MC

answer

a. TC = TVC + TFC

question

Samantha consumes both pizza and music downloads. The following table shows her marginal utility from these. What is her total utility from purchasing four music downloads?
a. 4
b. 14
c. 18
d. 20
e. 21

answer

d. 20

question

13. In order to determine the average variable cost, the firm's variable costs are divided by
A. It's fixed costs
B. The quantity of output
C. It's average costs
D. Diminishing marginal costs

answer

B. The quantity of output

question

14. In order to calculate marginal cost, we will divide ______________ by the amount of change in quantity.*
0/2
A. change in total costs
B. increasing marginal returns
C. total fixed cost
D. decreasing marginal returns

answer

A. change in total costs

question

16. Indirect, non-purchased, or opportunity costs of resources provided by the entrepreneur are known as*
0/2
A. Implicit cost
B. Explicit costs
C. Opportunity Costs
E. Marginal Costs

answer

A. Implicit cost

question

19. With capital fixed at one unit with 1, 2, 3 units of labor added in equal successive units, production of the output increases from 300 (1 unit of labor), to 350 (2 units of labor) to 375 (3 units of labor). Which of the following is a correct interpretation?*
0/4
a. This is long run increasing returns to scale.
b. This is a long run decreasing returns to scale.
c. This is long run constant returns to scale.
d. This is short run diminishing marginal productivity.
e. This is short run increasing marginal productivity.

answer

d. This is short run diminishing marginal productivity.

question

20. Marginal cost (MC) is equal to average variable cost (AVC) and average total cost (ATC) when:*
0/3
a. marginal cost (MC) intersects AVC and ATC at their maximum points
b. AVC and ATC intersect MC at its maximum point.
c. MC intersects AVC and ATC at their minimum points.
d. AVC and ATC intersect MC at its minimum point.
e. the economy is in recovery phase of the business cycle.

answer

c. MC intersects AVC and ATC at their minimum points.

question

1. Which of the following statements is true regarding the marginal cost (MC), average variable cost (AVC), and average total cost (ATC) curves?*
0/3
a. If MC is greater than ATC and AVC, then ATC and AVC must be decreasing
b. If MC is greater than ATC and AVC, then ATC and AVC must be increasing.
c. If MC is decreasing, then ATC and AVC must be decreasing.
d. If ATC and AVC are decreasing, MC must be decreasing as well.
e. If ATC and AVC are increasing, MC must be increasing.

answer

b. If MC is greater than ATC and AVC, then ATC and AVC must be increasing.

question

For Questions 22, 23, and 24, use the data given in the following table. The fixed cost of the firm is $500, and the firm's total variable cost is indicated in the table. #22. The average variable cost of the firm when 4 units of output are produced is:*
0/3
a. $175
b. $200
c. $300
d. $700
e. $1000

answer

a. $175

question

23.The average total cost of the firm when 4 units of output are being sold is*
a. $175
b. $200
c. $300
d. $700
e. $1800

answer

c. $300

question

24. The marginal cost of the sixth unit of output is*
0/2
a. $200
b. $300
c. $700
d. $800
e. $1000

answer

d. $800

question

. Which cost curves do 1, 2, 3, and 4 represent in order from 1 to 4 ?*
0/3
a. ATC, MC, AFC, AVC
b. MC, AFC, AVC, ATC
c. MC, ATC, AVC, AFC
d. AFC, MC, ATC, AVC
e. AFC, AVC, ATC, MC

answer

e. AFC, AVC, ATC, MC

question

26. Summing the marginal utilities of each unit consumed will determine total*
0/2
a. cost
b. revenue
c. utility
d. consumption

answer

c. utility

question

28. Suppose a firm produces 100,000 units a year and sells them all for $5 each. The explicit costs of production are $350,000 and the implicit costs of production are $100,000. The firm has an accounting profit of*
0/3
a. $200,000 and an economic profit of $25,000
b. $150,000 and an economic profit of $50,000
c. $125,000 and an economic profit of $75,000
d. $100,000 and an economic profit of $50,000

answer

b. $150,000 and an economic profit of $50,000

1 of 66

question

answer

D. Firms with many similar products depend on product differentiation, or branding.

question

answer

A) inferior goods.

question

answer

d. collusion

question

answer

Excess capacity

question

answer

b. The unemployment rate of 6.8 percent is too high

question

answer

c. a market economy

question

The law of supply states, other things being constant, as price increases,

a. supply increases
b. supply decreases
c. quantity supplied increases
d. quantity supplied decreases

answer

c. quantity supplied increases

question

answer

b. there is a surplus of the product

question

answer

b. complementary goods

question

If a 2% fall in the price of a product causes the quantity demanded of the product to increase by 2%, demand is*

a. inelastic
b. elastic
c. unit-elastic
d. perfectly elastic

answer

c. unit-elastic

question

answer

d. other goods and services that must be sacrificed to construct the new stadium

question

In which market model are very large number of firms with identical products?*

a. monopolistic competition
b. oligopoly
c. monopoly
d. perfect competition

answer

d. perfect competition

question

Income elasticity of demand for is negative. This information indicates a/an*

a. normal good
b. inferior good
c. substitute
d. complement
Correct answer
b. inferior good

answer

b. inferior good

question

Direct, purchased, out-of-pocket costs paid to resource suppliers outside the firm are called*
3/3
A. Implicit cost
B. Explicit costs
C. Opportunity Costs
E. Marginal Costs

answer

B. Explicit costs

question

answer

c. are diseconomies of scale

question

Which triple identity results in the most efficient use of resources in perfect competition?*
0/3
P = MC = minimum ATC
b. P = AR = MR
c. P = MR = minimum MC
d. TR = MC = MR

answer

c. P = MR = minimum MC

question

Given the following graph, if the firm is producing at output level ON, the rectangle FECB is*
a. total variable cost
b. total fixed cost
c. total revenue
d. total economic profit

answer

d. total economic profit

question

If the supply curve moves from S to S2 on the graph below, there has been
a. an increase in supply
b. a decrease in supply
c. an increase in quantity supplied
d. a decrease in quantity supplied

answer

c. an increase in quantity supplied

question

answer

B) the price of a substitute product decreased

question

The demand curve for the pure monopolist is*
3/3
a. Perfectly price-elastic
b. Perfectly price-inelastic
c. downsloping
d. upsloping

answer

c. downsloping

question

answer

a. $100,000 in economic profits

question

Given the following table, the profit-maximizing output and price for this monopolist would be
a. 1 and $100
b. 2 and $200
c. 3 and $400
d. 4 and $300

answer

c. 3 and $400

question

answer

d. How individuals, institutions, and society make optimal choices under conditions of scarcity."

question

Which cost curves do 1, 2, 3, and 4 represent in order from 4 to 1 ?
a. ATC, MC, AFC, AVC
b. MC, AFC, AVC, ATC
c. MC, ATC, AVC, AFC
d. AFC, MC, ATC, AVC
e. AFC, AVC, ATC, MC

answer

c. MC, ATC, AVC, AFC

question

answer

d. $5.00

question

answer

d. a shift in the production possibilities curve out to point C

question

answer

a) price set below the current market clearing price of the good.

question

answer

c. perfectly elastic

question

answer

a. with an economic loss in the short run

question

In which market model is the individual seller of a product a price taker?*
0/3
a. perfect competition
b. pure monopoly
c. monopolistic competition
d. oligopoly

answer

a. perfect competition

question

answer

c. the output and price of wheat in the United States

question

answer

B. oligopoly

question

answer

(C)The production possibilities frontier is concave to the origin because of the law of increasing costs.

question

answer

One in which marginal benefits are greater than marginal costs

question

answer

question

answer

question

In the circular flow model, businesses*

a. buy products and resources
b. sell products and resources
c. buy products and sell resources
d. sell products and buy resources

answer

d. sell products and buy resources

question

answer

(D) the resource use of the entire nation

question

Consumers' willingness and ability to buy a good or service at a different price that exist in a market is called*

Supply
Elasticity of supply
Demand
Elasticity of demand

answer

Demand

question

answer

The higher the price, the more producers will supply

question

The minimum wage is an example of:*

a price floor that creates a shortage
a price floor that creates a surplus
a price ceiling that creates a shortage
price ceiling that creates a surplus

answer

a price floor that creates a surplus

question

answer

The demand curve will shift to the left

question

If average households income rises and observe that the demand for pork chops increases, pork chops must be:*

An inferior good
A normal good
A surplus good
A necessity

answer

A normal good

question

A decrease in demand is depicted by a:*

move from point x to point y.
shift from D1 to D2.
shift from D2 to D1.
move from point y to point x.
no movement at all

answer

shift from D2 to D1.

question

answer

The percentage change in quantity is greater than the percentage change in price

question

answer

total revenues increased

question

The reason for the law of demand can be best explained in terms of*

supply
complementary goods
the rationing function of prices
diminishing marginal utility

answer

diminishing marginal utility

question

answer

...

question

answer

Price will increase; quantity will increase

question

If the supply curve moves from S to S2 on the graph below, there has been*

an increase in supply
a decrease in supply
an increase in quantity supplied
a decrease in quantity supplied

answer

an increase in supply

question

answer

increase the demand for the other

question

answer

a decrease in the number of buyers

question

Which of the following is true?*
0/2
a. TC = TVC + TFC
b. TFC = TC at all levels of output
c. AVC + AFC = TC
d. MC = TC - TFC
e. ATC = AVC + MC

answer

a. TC = TVC + TFC

question

answer

d. 20

question

13. In order to determine the average variable cost, the firm's variable costs are divided by
A. It's fixed costs
B. The quantity of output
C. It's average costs
D. Diminishing marginal costs

answer

B. The quantity of output

question

answer

A. change in total costs

question

16. Indirect, non-purchased, or opportunity costs of resources provided by the entrepreneur are known as*
0/2
A. Implicit cost
B. Explicit costs
C. Opportunity Costs
E. Marginal Costs

answer

A. Implicit cost

question

answer

d. This is short run diminishing marginal productivity.

question

answer

c. MC intersects AVC and ATC at their minimum points.

question

answer

b. If MC is greater than ATC and AVC, then ATC and AVC must be increasing.

question

answer

a. $175

question

23.The average total cost of the firm when 4 units of output are being sold is*
a. $175
b. $200
c. $300
d. $700
e. $1800

answer

c. $300

question

24. The marginal cost of the sixth unit of output is*
0/2
a. $200
b. $300
c. $700
d. $800
e. $1000

answer

d. $800

question

. Which cost curves do 1, 2, 3, and 4 represent in order from 1 to 4 ?*
0/3
a. ATC, MC, AFC, AVC
b. MC, AFC, AVC, ATC
c. MC, ATC, AVC, AFC
d. AFC, MC, ATC, AVC
e. AFC, AVC, ATC, MC

answer

e. AFC, AVC, ATC, MC

question

26. Summing the marginal utilities of each unit consumed will determine total*
0/2
a. cost
b. revenue
c. utility
d. consumption

answer

c. utility

question

answer

b. $150,000 and an economic profit of $50,000

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