AP Microeconomics Final Test Review

question

Scarcity in economics means:

answer

society is unable to produce all the goods and services we want with existing resources

question

What are three primary questions all economic systems must address?

answer

what to produce; how to produce; and for whom to produce

question

The problem of determining goods and services society should produce:

answer

exists because there are not enough resources to provide all the goods and services that people want to purchase

question

Elbonia produced potatoes at the lowest possible cost per acre to its competitors, whereas Slobenia produces sugar beers at the lowest possible cost per acre even though both could produce potatoes and beets. This is an example of:

answer

comparative advantage

question

The best measure of the opportunity cost of any choice is:

answer

whatever you have given up to make that choice, even if no monetary costs are involved.

question

The study of the costs and benefits of doing more of an activity versus less is known as:

answer

marginal analysis

question

If the price of gasoline falls and stays low for an extended period of time, we expect people to:

answer

buy larger and less fuel-efficient cars

question

Which of the following best defines comparative advantage?

answer

an economy's ability to produce a particular good at a lower opportunity cost than its trading partners

question

Which of the following would be a normative economic statement?

answer

government has grown too large and should be reduced

question

Which of the following best defines absolute advantage?

answer

absolute advantage is the ability of an individual, company, region, or country to produce a greater quantity of a good or service with the same quantity of i puts per unit of time, or to produce the same quantity of a good or service per unit of time using a lesser quantity of inputs, than its competitors

question

Adam owns Pins R Us, a pin factory in Pinstown, Pinsyltucky. Having read "Wealth of Nations" he decides that each worker will only perform one function in the pin making process during their respective shifts. Having pinned his success or failure on this decision, Adam discovers that the quantity of pins produced goes up substantially, compared to each worker making each pin from start to finish, thus increasing output while efficiently using inputs. Upon what economic principle would you pin Adams action?

answer

Specialization (division) of Labor

question

Comparing accounting profit to economic profit, accounting profit can:

answer

be equal to or more than economic profit

question

Assume a perfectly competitive firm is producing at a level of output where marginal revenue is greater than marginal cost. To maximize profits:

answer

the firm should increase output

question

Diminishing marginal returns always involve:

answer

a fixed input

question

If labor is the only variable input and the wage rate is constant, marginal cost reached its minimum when:

answer

marginal product reaches its maximum

question

monopolistically competitive industries are characterized by:

answer

differentiated products, many firms, and easy entry and exit

question

Compared to a monopolistically competitive industry, an olipogoly has:

answer

a higher Herfindahl-Hirschman Index, fewer firms, and more barriers to entry

question

For a perfectly competitive firm in both the product market and the factor market, he demand curve for labor slopes downward due to:

answer

diminishing marginal returns

question

For a monopsony, the marginal factor cost of labor curve lies above the supply curve at every quantity of labor due to:

answer

all workers receiving the same wage rate

question

Assume an effective minimum wage is imposed on a monopsony labor market, and the minimum wage is set below the wage that would exist in a perfectly competitive market. Employment would:

answer

increase, but there would be a shortage of workers

question

Assume a firm is operating a monopolist in the product market and as a perfect competitor in the factor market. The firms demand curve for labor will be:

answer

downward sloping due to diminishing marginal returns and decreasing marginal revenue

question

According to marginal productivity theory, wage inequality in perfectly competitive markets can be attributed to:

answer

compensating differentials

question

Efficiency wages are wages that:

answer

are above market equilibrium wages.

question

The poverty rate is the percentage of the population that:

answer

earns less than the poverty threshold

question

Which of the following conditions contributes to the resolution of externality problems as suggested by the Coase theorem?

answer

the legal rights of the parties involved are clearly defines

question

When the production of a hood created negative externalities, which of the following leads to the socially optimal quantity of output?

answer

a Pigouvian tax ser equal to marginal cost

question

Which of the following is an example of market failure?

answer

fishing in many waterways brings the quantity of fish below its socially optimal level

question

Firms in the model of perfect competition will:

answer

increase output up to the point that the marginal revenue is equal to the marginal cost.

question

Zoe's Bakery perales in a perfectly competitive industry. Suppose that when the market price is $5, the profit maximizing output level of pastries is 150 units, with average total cost of $4, and average variable cost of $3. From this we know Zoe's marginal cost is ____ and her short run profits are ___.

answer

$5; $150

question

The profit maximizing level of output for a perfectly competitive firm in the short run occurs where:

answer

marginal cost equals the price

question

The short run supply curve for a perfectly competitive firm id it's:

answer

marginal cost curve above its average variable cost curve

question

The horizontal sin of individual firms' MC curves at and above the shut down price is the:

answer

short run industry supply curve

question

A perfectly competitive industry is said to be efficient because the:

answer

average total cost of production of the industry's output is minimized

question

The demand curve for a monopoly is:

answer

above the MR curve.

question

Compared to perfect competition:

answer

monopoly produces fewer units at a higher price

question

One successful government policy for dealing with a natural monopoly is to:

answer

impose a price ceiling to eliminate any economic profit

question

The price in monopoly prevents some mutually beneficial trades from taking place. The value of these unrealized mutually beneficially trades id called:

answer

a deadweight loss

question

Which of the following is true regarding monopolies?

answer

monopolies produce too little and charge too much from the standpoint of efficiency

question

If the only two firms in an industry agree to fix the price at a given level, this is an example of:

answer

collusion

question

A strategy that is the same regardless of the action of the other player in the game is said to be a:

answer

dominant strategy

question

The study of behavior in situations of interdependence is known as:

answer

game theory

question

When most cars sold in the United States were produced by the Big Three auto companies, General Motors would announce its prices for the new model year first and then the other companies would match it. This practice was an example of:

answer

price leadership

question

If a firm under monopolistic competition is producing a quantity that generates MC <
MR, then the marginal decision rule tells us that profit:

answer

can be increased by decreasing production

question

A good reason for a monopolistic competitor to engage in advertising would be:

answer

to create a greater perception of product differentiation in the minds of potential consumers.

1 of 44

question

Scarcity in economics means:

answer

society is unable to produce all the goods and services we want with existing resources

question

What are three primary questions all economic systems must address?

answer

what to produce; how to produce; and for whom to produce

question

The problem of determining goods and services society should produce:

answer

exists because there are not enough resources to provide all the goods and services that people want to purchase

question

answer

comparative advantage

question

The best measure of the opportunity cost of any choice is:

answer

whatever you have given up to make that choice, even if no monetary costs are involved.

question

The study of the costs and benefits of doing more of an activity versus less is known as:

answer

marginal analysis

question

If the price of gasoline falls and stays low for an extended period of time, we expect people to:

answer

buy larger and less fuel-efficient cars

question

Which of the following best defines comparative advantage?

answer

an economy's ability to produce a particular good at a lower opportunity cost than its trading partners

question

Which of the following would be a normative economic statement?

answer

government has grown too large and should be reduced

question

Which of the following best defines absolute advantage?

answer

question

answer

Specialization (division) of Labor

question

Comparing accounting profit to economic profit, accounting profit can:

answer

be equal to or more than economic profit

question

Assume a perfectly competitive firm is producing at a level of output where marginal revenue is greater than marginal cost. To maximize profits:

answer

the firm should increase output

question

Diminishing marginal returns always involve:

answer

a fixed input

question

If labor is the only variable input and the wage rate is constant, marginal cost reached its minimum when:

answer

marginal product reaches its maximum

question

monopolistically competitive industries are characterized by:

answer

differentiated products, many firms, and easy entry and exit

question

Compared to a monopolistically competitive industry, an olipogoly has:

answer

a higher Herfindahl-Hirschman Index, fewer firms, and more barriers to entry

question

For a perfectly competitive firm in both the product market and the factor market, he demand curve for labor slopes downward due to:

answer

diminishing marginal returns

question

For a monopsony, the marginal factor cost of labor curve lies above the supply curve at every quantity of labor due to:

answer

all workers receiving the same wage rate

question

Assume an effective minimum wage is imposed on a monopsony labor market, and the minimum wage is set below the wage that would exist in a perfectly competitive market. Employment would:

answer

increase, but there would be a shortage of workers

question

Assume a firm is operating a monopolist in the product market and as a perfect competitor in the factor market. The firms demand curve for labor will be:

answer

downward sloping due to diminishing marginal returns and decreasing marginal revenue

question

According to marginal productivity theory, wage inequality in perfectly competitive markets can be attributed to:

answer

compensating differentials

question

Efficiency wages are wages that:

answer

are above market equilibrium wages.

question

The poverty rate is the percentage of the population that:

answer

earns less than the poverty threshold

question

Which of the following conditions contributes to the resolution of externality problems as suggested by the Coase theorem?

answer

the legal rights of the parties involved are clearly defines

question

When the production of a hood created negative externalities, which of the following leads to the socially optimal quantity of output?

answer

a Pigouvian tax ser equal to marginal cost

question

Which of the following is an example of market failure?

answer

fishing in many waterways brings the quantity of fish below its socially optimal level

question

Firms in the model of perfect competition will:

answer

increase output up to the point that the marginal revenue is equal to the marginal cost.

question

answer

$5; $150

question

The profit maximizing level of output for a perfectly competitive firm in the short run occurs where:

answer

marginal cost equals the price

question

The short run supply curve for a perfectly competitive firm id it's:

answer

marginal cost curve above its average variable cost curve

question

The horizontal sin of individual firms' MC curves at and above the shut down price is the:

answer

short run industry supply curve

question

A perfectly competitive industry is said to be efficient because the:

answer

average total cost of production of the industry's output is minimized

question

The demand curve for a monopoly is:

answer

above the MR curve.

question

Compared to perfect competition:

answer

monopoly produces fewer units at a higher price

question

One successful government policy for dealing with a natural monopoly is to:

answer

impose a price ceiling to eliminate any economic profit

question

The price in monopoly prevents some mutually beneficial trades from taking place. The value of these unrealized mutually beneficially trades id called:

answer

a deadweight loss

question

Which of the following is true regarding monopolies?

answer

monopolies produce too little and charge too much from the standpoint of efficiency

question

If the only two firms in an industry agree to fix the price at a given level, this is an example of:

answer

collusion

question

A strategy that is the same regardless of the action of the other player in the game is said to be a:

answer

dominant strategy

question

The study of behavior in situations of interdependence is known as:

answer

game theory

question

answer

price leadership

question

If a firm under monopolistic competition is producing a quantity that generates MC <
MR, then the marginal decision rule tells us that profit:

answer

can be increased by decreasing production

question

A good reason for a monopolistic competitor to engage in advertising would be:

answer

to create a greater perception of product differentiation in the minds of potential consumers.

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