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AP Microeconomics Unit 2: Supply and Demand — Free with Answer Explanations | Test Practice Hub

AP Microeconomics Unit 2: Supply and Demand

12 questions

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Unit 2: Supply and Demand

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Question 1

When incomes in a city rise and the price of apartments increases but the quantity rented stays the same, what most likely occurred?

A.Both supply and demand shifted left by equal amounts.B.Demand increased (shifted right) while supply also increased (shifted right) by the same amount.C.Demand increased (shifted right) while supply decreased (shifted left) by an equal amount.D.Only supply decreased, causing price to rise and quantity to fall.

Question 2

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.

Question 3

If the price elasticity of demand for insulin is $∣ E_{d} ∣ = 0.2$ , which of the following best describes this demand?

A.Elastic, because consumers are very responsive to price changes.B.Inelastic, because consumers are relatively unresponsive to price changes.C.Unit elastic, because the percentage change in price equals the percentage change in quantity.D.Perfectly elastic, because insulin is a life-saving drug.

Question 4

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 5

Consumer surplus in a competitive market is best defined as:

A.The total amount consumers spend on a good.B.The difference between the maximum price consumers are willing to pay and the price they actually pay.C.The profit earned by consumers from reselling goods at higher prices.D.The revenue a seller receives above the minimum acceptable price.

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Question 6

A price ceiling set below the equilibrium price will most likely result in:

A.A surplus because the controlled price is below equilibrium.B.A shortage because quantity demanded exceeds quantity supplied at the ceiling price.C.No change in quantity traded because sellers can negotiate around the ceiling.D.A surplus because suppliers produce extra output to compensate for the lower price.

Question 7

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.

Question 8

If the income elasticity of demand for a good is $- 0.8$ , the good is classified as:

A.A normal good with elastic demand.B.A luxury good because the elasticity is less than 1 in absolute value.C.An inferior good, because demand falls as income rises.D.A necessity, because the elasticity is less than 1.

Question 9

A deadweight loss (DWL) in a market arises whenever:

A.Equilibrium price is higher than the minimum price consumers are willing to pay.B.Quantity traded falls below or rises above the socially optimal (competitive equilibrium) quantity.C.Total consumer surplus exceeds total producer surplus.D.The government collects tax revenue from market transactions.

Question 10

A price floor set above the equilibrium wage in the labor market will most likely result in:

A.A shortage of workers, as employment exceeds the number of workers willing to work.B.A surplus of labor (unemployment), as quantity supplied exceeds quantity demanded.C.No impact if firms hire all workers who apply at the higher wage.D.A decrease in the quantity of labor supplied because workers prefer leisure at higher wages.

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Question 11

When the price of coffee rises by 10% and the quantity of tea demanded increases by 15%, the cross-price elasticity of demand for tea with respect to coffee is approximately:

- 1.5

, indicating that coffee and tea are complements.B.

+ 1.5

, indicating that coffee and tea are substitutes.C.

+ 0.67

, indicating that coffee and tea are substitutes.D.

0

, indicating that coffee and tea are unrelated goods.

Question 12

A 10% increase in the price of a good leads to a 10% decrease in quantity demanded. What is the price elasticity of demand, and what happens to total revenue?

∣ E_{d} ∣ = 1

; total revenue remains unchanged.B.

∣ E_{d} ∣ = 1

; total revenue increases because price rose.C.

∣ E_{d} ∣ = 2

; total revenue decreases because demand is elastic.D.

∣ E_{d} ∣ = 0.5

; total revenue increases because demand is inelastic.