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AP Microeconomics Easy practice

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Easy practice

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Question 1

In perfect competition, which of the following best characterizes average fixed cost (AFC) as output increases?

A.AFC rises as more units share the overhead cost.B.AFC is constant because fixed costs do not change with output.C.AFC declines continuously and approaches zero as output increases.D.AFC eventually rises because fixed costs become more burdensome at high output.

Question 2

If the marginal benefit of consuming a good is greater than its marginal cost, a rational individual should:

Question 3

A linear PPC has endpoints at (0, 80) for Good Y and (40, 0) for Good X. What is the opportunity cost of producing one additional unit of Good X?

\frac{1}{2}

unit of Good YB.2 units of Good YC.40 units of Good YD.80 units of Good Y

Question 4

Which of the following best describes a public good?

A.A good produced by the government and provided free of charge.B.A good that is non-rival in consumption and non-excludable.C.A good with high positive externalities that benefit all members of society.D.A good provided by a regulated monopoly to ensure fair access.

Question 5

Which of the following markets would most likely have the most price-elastic demand?

A.Prescription heart medication with no generic alternative.B.Gasoline for commuters with no public transit option.C.A specific brand of luxury wristwatch.D.Table salt purchased for cooking.

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Question 6

A perfectly competitive firm has $P = \$ 15 $,$ ATC = $18$ , and $AVC = \$ 12$ at the profit-maximizing quantity. What is the firm's economic situation?

A.The firm earns a positive economic profit and will expand output.B.The firm incurs a loss but should continue to produce in the short run.C.The firm incurs a loss and should immediately shut down.D.The firm earns zero economic profit (break-even point).

Question 7

A Pigouvian tax is designed to correct a negative externality by:

A.Raising the private marginal cost to equal the social marginal cost.B.Subsidizing affected third parties to compensate them for the harm received.C.Eliminating all production of the good causing the externality.D.Lowering the price of the good so that more consumers can afford it.

Question 8

The Gini coefficient is a measure of income inequality that ranges from 0 to 1. A Gini coefficient closer to 1 indicates:

A.Perfect equality, where every household earns the same income.B.Greater income inequality, with income concentrated among fewer households.C.Rapid economic growth, as high earners generate more productivity and investment.D.Low unemployment, because more people are earning income in the economy.

Question 9

A firm's total fixed cost is $200 an d i t s t o t a l v a r iab l ecos t a t 10 u ni t so f o u tp u t i s$ 300. What is the average total cost (ATC) at 10 units?

A.$20B.$30C.$50D.$500

Question 10

Producer surplus can be defined as:

A.Total revenue minus total explicit costs of production.B.The amount producers receive above the minimum they would accept for each unit sold.C.The quantity supplied minus the quantity demanded at the market price.D.The difference between the maximum price consumers pay and the equilibrium price.

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Question 11

In a competitive market for gasoline, which of the following would cause the equilibrium price to rise and equilibrium quantity to fall?

A.An increase in consumer incomes, assuming gasoline is a normal good.B.A decrease in the price of crude oil, a key input.C.A new environmental regulation that raises refining costs.D.An increase in the number of sellers in the gasoline market.

Question 12

Which of the following is the best example of a marginal decision?

A.A firm decides whether to enter a new industry.B.A government sets a national budget for the next fiscal year.C.A student decides whether to study one additional hour for a test.D.A country chooses between a market economy and a command economy.

Question 13

The free-rider problem in public goods markets means that:

A.Private firms overprovide the good to attract paying customers.B.Individuals have no incentive to reveal their true willingness to pay, leading to underprovision.C.Wealthier individuals pay for the good and provide it free to everyone else.D.Public goods are consumed more rapidly than private goods, depleting them faster.

Question 14

Which of the following would increase the demand for labor in the market for construction workers?

A.An increase in the wage rate paid to construction workers.B.A decrease in the price of new homes in the housing market.C.An increase in demand for new housing construction.D.An increase in the productivity of new construction machinery, substituting for workers.

Question 15

A monopolist faces the demand schedule below. What is the marginal revenue of the 3rd unit?

Quantity	Price
1	$10∣∣2∣$ 8
3	$6∣∣4∣$ 4

A.$6B.$2C.$18D.

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