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AP Microeconomics Midterm 2021

Terms in this set (51)

The demand curve for a normal good slopes down for which of the following reasons?
I. An increase in the price of the good causes consumers to purchase substitute products.
II. An increase in the price of the goods reduces consumers
III. An increase in the price of the good increases consumers' utility from consuming that good.

A) I Only
B) II Only
C) III Only
D) I & II Only
E) I & III Only
I & II Only
The table above shows the total cost and the total benefit of cleaning up pollution in a community. Which of the following cleanup levels is socially optimal?

A) 1
B) 2
C) 3
D) 4
E) 5
2
Assume the following utility schedule for Aaliyah's ice cream consumption. If she consumes 6 units, what is the value of her total utility from consuming ice cream?

A) 22
B) 20
C) 18
D) 0
E) -2
18
The additional satisfaction received from consuming an additional unit of good is called the

A) Marginal Utility
B) Marginal Product
C) Average Product
D) Average Utility
E) Total Utility
Marginal Utility
Carlos has a van with 20 seats and charges $10 per person per ride to the airport from downtown. Carlos' cost of the trip is $140 for any number of passengers. On one trip, Carlos has 19 seats filled when a person offers him $5 for the last seat. Should Carlos accept the offer?

A) No, since the $5 fare offered is below his average cost of $7.
B) No, since the average variable cost is greater than $5.
C) No, since it is illegal to charge different prices for the same service.
D) Yes, since the marginal benefit exceeds the marginal cost.
E) Yes, since his total revenue exceeds his total cost by $5.
Yes, since his total revenue exceeds his total cost by $5
Which of the following changes in the demand for and the supply of a good will necessarily result in an increase in both the equilibrium price and quantity of the good in a market?

A) Demand Increases/Supply Increases
B) Demand Increases/Supply No Change
C) Demand No Change/Supply Increases
D) Demand Decreases/Supply increases
E) Demand No Change/Supply Decreases
Demand Increases/Supply No Change
The graph above shows the market demand for good X. A movement from point A to point B would most likely be caused by

A) an increase in the price of good Z, a substitute.
B) an increase in consumers' income.
C) a decrease in consumers' income.
D) a decrease in the production costs for good X.
E) a decrease in the supply of good X.
a decrease in the production costs for good X
Assume there are two goods in a market economy. The amount of each good produced is determined by

A) buyers and sellers' interactions in the market for each good.
B) a central planning agency.
C) the desires of households only.
D) each citizen's minimum needs for survival.
E) popular voting with one vote per citizen.
buyers and sellers' interactions in the market for each good
Which of the following will shift the supply curve for apples to the right?

A) An increase in consumers' income
B) An increase in the price of apples
C) An increase in the wages of apple pickers
D) A decrease in the rental price for apple harvesting equipment
E) A decrease in the demand for oranges, a substitute in consumption
A decrease in the rental price for apple harvesting equipment
The graphs above show Mary's demand for hamburgers and Mark's demand for hamburgers. Suppose Mary and Mark are the only two consumers in the market. Which of the following is a point on the market demand curve for hamburgers?

A) Price $2 Quantity 12
B) Price $4 Quantity 7
C) Price $6 Quantity 6
D) Price $8 Quantity 4
E) Price $10 Quantity 8
Price $4 Quantity 7
A linear production possibilities curve indicates which of the following?

A) Constant opportunity costs
B) Decreasing opportunity costs
C) Increasing opportunity costs
D) Diminishing marginal returns
E) Labor-intensive production
Constant opportunity costs
Using cost-benefit analysis, a local government would decide to build a new bridge if

A) The additional tax paid by an individual resident is greater than the additional benefit of building the bridge for all residents.
B) The toll paid by an individual resident crossing the bridge is less than the resident's benefit from crossing the bridge.
C) the total costs of building the bridge are less than the total benefits from building the bridge.
D) the total costs of building the bridge are greater than the total benefits from building the bridge.
E) total costs are at a minimum and total benefits are at a maximum.
total costs are at a minimum and total benefits are at a maximum
A decrease in raw material prices will change the equilibrium price and quantity in a market in which of the following ways?

A) P Increases Q Increases
B) P Increases Q Decreases
C) P Decreases Q Increases
D) P Decreases Q Decreases
E) P No Change Q Increases
P Decreases Q Increases
If the increase in the price of one good decreases the demand for another, then the two goods are

A) Inferior Goods
B) Luxury Goods
C) Normal Goods
D) Substitute Goods
E) Complementary Goods
Complementary Goods
At her current level of consumption, a consumer is willing to pay up to $1.50 for a bottle of water and up to $1,500 for a diamond ring because the

A) total utility of diamond rings is greater than the total utility of water.
B) total utility of water is less than the marginal utility of a diamond ring.
C) marginal utility of a water bottle is less than the marginal utility of a diamond ring.
D) marginal utility of a water bottle is greater than the marginal utility of a diamond ring.
E) consumer is irrational and does not understand that water is more important than a diamond.
marginal utility of a water bottle is less than the marginal utility of a diamond ring
Of the feasible and efficient points on the production possibilities curve (PPC) above, producing at which point will lead to the most economic growth in the future>

A) Point M
B) Point N
C) Point R
D) Point J
E) Point S
Point N
Assume that more corn is used to produce ethanol. Simultaneously, more effective control of pests and weeds occurs in farming. Which of the following will definitely occur in the corn market?

A) The price of corn will increase.
B) The quantity of corn will decrease.
C) The price of corn will decrease.
D) The quantity of corn will increase.
E) The supply of corn will decrease.
The quantity of corn will increase
The diagram above shows an economy's current production possibilities curve for capital goods and consumer goods. If society chooses point B over point A, society is choosing

A) more future consumption in exchange for less current consumption.
B) more current capital goods in exchange for less future consumption.
C) more future and current consumption.
D) less future consumption in exchange for more current consumption.
E) less current capital goods in exchange for greater future consumption.
more future consumption in exchange for less current consumption
Which of the following describes how a market will respond when the scarcity of a good increases?

A) Consumers will increase their demand for the good.
B) Consumers will decrease their demand for the good.
C) The price of the good will increase.
D) The price of the good will decrease.
E) Producers will increase the supply of the good.
...
The supply curve for automobiles will shift to the left in response to

A) an increase in the efficiency of robot technology.
B) an increase in wages in the automobile industry.
C) a decrease in the number of consumers purchasing automobiles.
D) a decrease in the interest rates for automobile loans.
E) a decrease in consumers' income.
an increase in wages in the automobile industry
The graph above shows an economy's production possibilities frontier for the production of two goods, X and Y. Assume that the economy is currently at point B. The opportunity cost of moving from point B to point C is

A) AH units of good Y
B) HG units of good Y
C) OG units of good Y
D) EF units of good X
E) OF units of good X
HG units of good Y
The surgeon general announces that eating an artichoke a day dramatically reduces one's likelihood of developing cancer. Simultaneously an infestation of the artichoke weevil severely damages the crop. Which of the following will definitely occur as a result?

A) The supply of artichokes will increase.
B) The price of artichokes will increase.
C) The demand for artichokes will decrease.
D) The quantity of artichokes grown will decrease.
E) The profits of farmers who specialize in growing artichokes will decrease.
The price of artichokes will increase
Improvements in technology for producing all goods must result in

A) an inward shift in the production possibilities curve.
B) a flatter production possibilities curve.
C) an outward shift in the production possibilities curve.
D) a steeper production possibilities curve.
E) greater unemployment of labor.
an outward shift in the production possibilities curve
The table below shows the per-unit prices and marginal utility for the last unit of video games and comic books that Kyle purchased.

Kyle spent all of his allocated budget on video games and comic books. To maximize his utility, Kyle should have purchased

A) more video games and fewer comic books.
B) fewer video games and more comic books.
C) fewer of both goods.
D) equal amounts of both goods.
E) more of both goods.
fewer video games and more comic books
The allocation of resources in a market economy is described by which of the following statements?
I.
II.
III.

A)
B)
C)
D)
E)
...
After the government imposed a $0.20 per gallon tax on gasoline, the price of a gallon of gasoline increased from $1.00 to $1.15. Which of the following statements is true?

A. Consumers bear the entire burden of the tax, since producers can pass the tax along to consumers.
B. Consumers and producers share the tax burden equally.
C. Consumers bear most, but not all, of the tax burden.
D. Producers bear the entire burden of the tax, since the tax was levied on producers, not consumers.
E. There is no tax burden, since gasoline is a normal good.
...
Assume that demand for bottle water is relatively price elastic. An increase in supply of bottled water will result in which of the following?

A) A decrease in price, leading to an increase in total revenue.
B) A decrease in price, leading to a decrease in total revenue.
C) An excess supply of bottled water.
D) An excess demand for bottled water.
E) A relatively small decrease in price and no change in equilibrium quantity.
...
If the price elasticity of supply for pickles is 2 and the price of pickles increases by 10 percent, then the quantity supplied of pickles will increase by

A) 0.2%
B) 5%
C) 8%
D) 12%
E) 20%
...
Improvements in technology for producing all goods must result in

A) an inward shift in the production possibilities curve.
B) a flatter production possibilities curve.
C) an outward shift in the production possibilities curve.
D) a steeper production possibilities curve.
E) greater unemployment of labor.
an outward shift in the production possibilities curve
If a 10 percent increase in the price of a good leads to a 25 percent decrease in the quantity demanded of the good, demand is

A) relatively inelastic
B) relatively elastic
C) unit elastic
D) perfectly elastic
E) perfectly inelastic
...
Based on the graph above, the consumer surplus at the market equilibrium price and quantity is shown by which area?

A) GMK
B) GMN
C) GZN
D) ZMN
E) MNK
...
The allocation of resources in a market economy is described by which of the following statements?
I. The government decides which goods will be produced and which consumers will receive them.
II. Buyers and sellers exchange goods and services on a voluntary basis.
III. Prices and costs help producers decide whether they are producing too little or too much of a good.

A) I Only
B) II Only
C) III Only
D) I & III Only
E) II & III Only
II & III Only
The difference between the price a consumer would be willing to pay for a cone of ice cream and the actual market price that she says gives a measure of her

A) Consumer Surplus
B) Producer Surplus
C) Marginal Utility
D) Marginal cost
E) Ability to pay
...
To correct for positive externalities, the government should

A) do nothing, since no harm is done by positive externalities.
B) levy a tax on the output of the good or service.
C) pay a subsidy equal to the marginal external benefit.
D) impose a price ceiling on the good to discourage its production.
E) impose a price floor on the good at which the marginal private benefit equals the marginal social cost.
...
Which of the following statements about the price elasticity of demand is true?

A) When demand is price inelastic, total revenue will decrease as price increases.
B) When demand is price elastic, an increase in price will increase total revenue.
C) Demand tends to be more elastic in the short run compared to the long run.
D) As more close substitutes become available, demand tends to be more price elastic.
E) As a good becomes viewed as a necessity, demand becomes more price elastic.
...
One major difference between public goods and private goods is that

A) public goods exclude nonpaying consumers, while private goods are available to all.
B) public goods are inferior goods, while private goods are normal goods.
C) public goods generate negative externalities, while private goods generate positive externalities.
D) it is difficult to charge customers directly for the provision of public goods.
E) it is impossible for private firms to produce public goods.
...
Assume that the price of orange juice increases by 40 percent following a crop failure. If the quantity demanded falls by 10 percent, which of the following is true?

A) The demand for orange juice is elastic.
B) The absolute value of the price elasticity of demand for orange juice is 0.25.
C) The price of grapefruit juice, a substitute good, will fall.
D) The absolute value of the price elasticity of demand for orange juice is 4.
E) The absolute value of the price elasticity of demand for orange juice is 10.
...
If the value of the price elasticity of supply is 3, which of the following is true?

A) A 10 percent decrease in price will decrease the quantity supplied by 30 percent.
B) Supply is inelastic.
C) A percentage increase in price will lead to a relatively smaller percentage increase in quantity supplied.
D) The supply curve is downward sloping with respect to the price of output.
E) A 3 percent increase in price will decrease the quantity supplied by 10 percent.
...
The market inefficiency of a negative production externality will be eliminated if a policy is put in place that results in which of the following outcomes?

A) The level of output produced is maximized.
B) The marginal benefit of production is maximized.
C) The marginal cost of production is minimized.
D) The marginal social benefit of production exceeds the marginal social cost.
E) The marginal social benefit of production is equal to the marginal social cost.
...
In the figure above, at which of the given points is demand most elastic?

A) X
B) Y
C) Z
D) The elasticity is the same for all points.
E) The relative elasticity cannot be determined with the given information.
...
Good X is produced in a perfectly competitive industry in long-run equilibrium. If the consumption of good X generates positive externalities, the private market will produce

A) less than the socially optimum amount of good X.
B) more than the socially optimum amount of good X.
C) the socially optimum amount of good X.
D) good X only if the government grants a subsidy for the production of good X.
E) good X only if the government levies a corrective tax on the production of good X.
...
Given the position of the marginal social cost curve above, one can conclude that the

A) private cost of producing good X exceeds the social cost of production at all levels of output.
B) production of good X creates a negative externality.
C) production of good X occurs in an imperfectly competitive market.
D) market quantity, Q3, is socially optimal quantity.
E) free market will produce too little of good X.
...
Which of the following is true based on the graph above?

A) Quantity of education in the private market is more than the socially optimal quantity.
B) Consumers of education could be subsidized in order to achieve the socially optimal quantity.
C) Producers of education could be taxed in order to achieve the socially optimal quantity.
D) Consumer of education could be taxed in order to achieve the socially optimal quantity.
E) Consumption of education has a negative externality.
...
The table above shows the total benefit associated with reducing different levels of pollution on a small island. The cost of eliminating one ton of pollution is $150. Which of the following is the optimal quantity of pollution to eliminate?

A) 5 Tons
B) 4 Tons
C) 3 Tons
D) 2 Tons
E) 1 Ton
...
Suppose that the demand for vegetables is price elastic. If the price of vegetables increases by 5 percent, the quantity of vegetables demanded would

A) increase by 5 percent
B) increase by more than five percent
C) increase by less than 5 percent
D) decrease by more than 5 percent
E) decrease by less than 5 percent
...
Which of the following is the best example of a negative externality?

A) Oil leakages from drilling platforms in the Gulf of Mexico
B) An increase in the price of oil due to the imposition of environmental regulations
C) An increase in the price of oil due to action taken by the Organization of Petroleum Exporting Countries (OPEC)
D) A decline in oil stock prices as a result of bad management
E) Declining restrictions on the importation of foreign-made cars.
...
If a store raises its prices by 20 percent and its total revenue increases by 10 percent, the demand it faces in this price range must be

A) Inelastic
B) Elastic
C) Unit Elastic
D) Perfectly Elastic
E) Perfectly Inelastic
...
Country Z is both a producer and an importer of green tea. If country Z imposes a tariff on imports of green tea, which of the following will occur in the domestic market of green tea?

A) Consumer surplus will increase.
B) Domestic production will increase.
C) Total consumption of green tea will increase.
D) Producer surplus will decrease.
E) The price paid by domestic consumers will decrease.
Domestic production will increase
Country Z is both a producer and an importer of cloth. Which of the following will happen if the government of Country Z imposes a tariff on cloth and the country continues to import some cloth from abroad?

A) There will be a decrease in domestic producer surplus.
B) There will be an increase in the quantity demanded for cloth.
C) As the country produces more cloth, there will be an efficiency gain for the economy.
D) There will be a decrease in consumer surplus for domestic consumers.
E) The domestic consumption of cloth will increase.
There will be a decrease in consumer surplus for domestic consumers
Country Z has a downward sloping domestic demand curve and an upward sloping domestic supply curve for widgets. In the absence of trade, the domestic price of widgets is P0. Now the country engages in trade, and the price for widgets, Pw, is below the domestic price, P0. Which of the following will occur?

A) Country Z will begin exporting widgets.
B) Consumer surplus will decrease in Country Z.
C) Domestic producer surplus will decrease in Country Z.
D) Domestic production of widgets in Country Z will increase.
E) The price of widgets received by domestic producers will increase.
Domestic producer surplus will decrease in Country Z
If the government imposes a tariff on imports of cheese, the price and quantity of imported cheese will most likely change in which of the following ways?

A) P Decrease Q Decrease
B) P Decrease Q Increase
C) P Increase Q Not Changed
D) P Increase Q Decrease
E) P Increase Q Increase
P Decrease Q Increase
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