AP Microeconomics

Section 11 Online Practice Test

Multiple Choice Identify the choice that best completes the statement or answers the question. 1. Output Total Cost 0 $10 1 60 2 80 3 110 4 170 5 245 Table: Total Cost and Output The table describes Bart's perfectly competiti e ice cream!prod"ci#$ firm. %f the mar&et price is $67.50' ho( ma#y "#its of o"tp"t (ill the firm prod"ce) a. o#e b. t(o c. three d. fo"r e. fi e

Figure 58-1: Marginal e!enue" Costs" and Pro#its

2.*+i$"re 58!1, -ar$i#al .e e#"e' /osts' a#d 0rofits1 %# the fi$"re' if mar&et price i#creases to $20' mar$i#al re e#"e 22222222 a#d profit!ma3imi4i#$ o"tp"t 22222222. a. i#creases5 i#creases b. i#creases5 decreases c. decreases5 i#creases d. decreases5 decreases e. remai#s co#sta#t5 remai#s co#sta#t $uantit% o# Apples &bushels' VC 0 $ 0 1 40 2 70 3 80 4 130 5 160 6 260 7 340 8 430 Table 58-(: )ill%*s Apple Orchard 3. *Table 58!2, 7illy's 8pple 9rchar:. 7illy is the price!ta&i#$ o(#er of a# apple orchard5 its ariable costs are $i e# i# the table. ;er orchard has fi3ed costs of $30. %f the price of a b"shel of apples is $25' ho( ma#y b"shels (ill 7illy prod"ce to ma3imi4e profit) a. 0 b. 1 c. 2 d. 3 e. 4

$uantit% o# )ots +ariable Costs 0 $0 10 200 20 300 30 500 40 750 50 1'100 Table 5,-1: +ariable Costs #or )ots 4. *Table 56!1, <ariable /osts for 7ots1 :"ri#$ the (i#ter' 8le3a r"#s a s#o(!cleari#$ ser ice' a#d s#o(! cleari#$ is a perfectly competiti e i#d"stry. ;er o#ly fi3ed cost is $1'000 for a tractor. ;er ariable costs per cleared lot' sho(# i# the table' i#cl"de f"el a#d hot coffee. =hat is 8le3a's sh"t!do(# price i# the short r"#) a. $0 b. $15 c. $50 d. $42 e. $20 Figure 5,-(: Prices" Cost Cur!es" and Pro#its

5. *+i$"re 56!2, /ost /"r es a#d 0rofits1 %# the fi$"re' if the mar&et price is $18 >02' this firm (ill, a. mi#imi4e its losses by sh"tti#$ do(#. b. mi#imi4e its losses by co#ti#"i#$ to prod"ce. c. brea& e e#. d. ear# a# eco#omic profit. e. e3it the mar&et i# the lo#$ r"#.

6.

%# the fi$"re' total cost at the profit!ma3imi4i#$ ?"a#tity of b"shels is $22222222. a. 3.50 b. 14 c. 56 d. 72 e. 4

7.

The fi$"re sho(s cost c"r es for a firm operati#$ i# a perfectly competiti e mar&et. %f the mar&et price is P4: a. firms (ill lea e the i#d"stry a#d the price (ill fall i# the lo#$ r"#. b. there (ill be eco#omic profits a#d firms (ill e#ter the i#d"stry i# the lo#$ r"#. c. the mar&et s"pply c"r e (ill shift to the left a#d price (ill fall i# the lo#$ r"#. d. the firm (ill prod"ce q4. e. the price (ill rise i# the lo#$ r"# as eco#omic profits fall to 4ero.

8. @co#omic profits i# a perfectly competiti e i#d"stry i#d"ce 22222222' a#d losses i#d"ce 22222222. a. e3it5 e#try b. e#try5 e#try c. e#try5 e3it d. e3it5 e3it e. e#try5 sh"tdo(# 6. A"ppose that the mar&et for hairc"ts i# a comm"#ity is a perfectly competiti e co#sta#t!cost i#d"stry a#d that the mar&et is i#itially i# lo#$!r"# e?"ilibri"m. A"bse?"e#tly' a# i#crease i# pop"latio# i#creases the dema#d for hairc"ts. %# the lo#$ r"#' (e e3pect that, a. more firms (ill e#ter the mar&et' dri i#$ the price of hairc"ts "p a#d the profits of i#di id"al firms bac& do(# to 4ero. b. more firms (ill e#ter the mar&et' dri i#$ the price of hairc"ts do(# a#d the profits of i#di id"al firms bac& do(# to 4ero. c. firms (ill lea e the mar&et' dri i#$ the price of hairc"ts "p a#d the profits of i#di id"al firms "p. d. firms (ill lea e the mar&et' dri i#$ the price of hairc"ts "p a#d the profits of i#di id"al firms bac& do(# to 4ero. e. more firms (ill e#ter the mar&et' dri i#$ the price of hairc"ts do(# a#d the profits of i#di id"al firms "p. 10. $uantit% o# Appels &bushels' +C 0 $ 0 1 40 2 70 3 80 4 130 5 160 6 260 7 340 8 430 Table: )ill%*s Apple Orchard 7illy is the price!ta&i#$ o(#er of a# apple orchard5 its ariable costs are $i e# i# the table. ;er orchard has fi3ed costs of $30. %f the price of a b"shel of apples is $85' (e (o"ld e3pect total i#d"stry o"tp"t to, a. rise' a#d 7illy's o"tp"t (ill rise i# the lo#$ r"#. b. fall' a#d 7illy's o"tp"t (ill fall i# the lo#$ r"#. c. fall' (hile 7illy's o"tp"t (ill rise i# the lo#$ r"#. d. rise' (hile 7illy's o"tp"t (ill fall i# the lo#$ r"#. e. rise' (hile 7illy's o"tp"t (ill remai# "#cha#$ed i# the lo#$ r"#.

11. /ompared to perfect competitio#, a. mo#opoly prod"ces more at a lo(er price. b. mo#opoly prod"ces (here MR B MC, a#d a perfectly competiti ely firm prod"ces (here P C MC. c. mo#opoly may ha e eco#omic profits i# the lo#$ r"#' b"t i# perfect competitio# eco#omic profits are 4ero i# the lo#$ r"#. d. perfect competitio# may ha e eco#omic profits i# the lo#$ r"#' b"t i# mo#opoly eco#omic profits are 4ero i# the lo#$ r"#. e. mo#opoly prod"ces (here MR C MC, a#d a perfectly competiti ely firm prod"ces (here P = MR B MC. 12. The ability of a mo#opolist to raise the price of a prod"ct abo e the competiti e le el by red"ci#$ the o"tp"t is &#o(# as, a. prod"ct differe#tiatio#. b. barrier to e#try. c. eco#omies of scale. d. pate#ts a#d copyri$hts. e. mar&et po(er. Figure -1-1: Pro#it-Ma.imi/ing Output and Price

13. *+i$"re 61!1, 0rofit!-a3imi4i#$ 9"tp"t a#d 0rice1 8ss"me there are #o fi3ed costs a#d 8/ C -/. %# the fi$"re' at the profit!ma3imi4i#$ ?"a#tity of prod"ctio# for the mo#opolist' total re e#"e is 22222222' total cost is 22222222' a#d profit is 22222222. a. $6005 $2005 $400 b. $1'6005 $3'2005 $1'600 c. $4'8005 $3'2005 $1'600 d. $4'8005 $1'6005 $3'200 e. $1'6005 $8005 $800

Figure -1--: Short- un Monopol%

14. *+i$"re 61!6, Ahort!."# -o#opoly1 The profit!ma3imi4i#$ o"tp"t r"le is satisfied by the i#tersectio# at poi#t, a. D. b. ;. c. E. d. 7. e. %. 15.

The $raph sho(s a mo#opoly firm that sells $ad$ets. %f the firm is re$"lated s"ch that the firm ear#s 4ero eco#omic profit' the firm (ill sell 22222222 "#its at a price of 22222222 per "#it. a. Q1 P1 b. Q2 P1 c. Q4 P3 d. Q3 P2 e. Q3 P3

Figure -(-1: 0emand" e!enue" and Cost Cur!es

16. *+i$"re 62!1, :ema#d' .e e#"e' a#d /ost /"r es1 The fi$"re sho(s the dema#d' mar$i#al re e#"e' mar$i#al cost' a#d a era$e total cost c"r es for +i$$le#"ts!.!Fs' a mo#opolist i# the fi$$le#"t mar&et. +i$$le#"ts!.!Fs (ill sell 22222222 fi$$le#"ts a#d set a price of 22222222 to ma3imi4e profits. a. 705 $65 b. 1005 $50 c. 1205 $40 d. 1505 $46 e. 705 $30 17. A"ppose a perfectly competiti e mar&et is s"dde#ly tra#sformed i#to o#e that operates as a mo#opoly mar&et. =e (o"ld e3pect, a. price to rise' o"tp"t to fall' co#s"mer s"rpl"s to rise' prod"cer s"rpl"s to rise' a#d dead(ei$ht loss to fall. b. price to rise' o"tp"t to fall' co#s"mer s"rpl"s to fall' prod"cer s"rpl"s to fall' a#d dead(ei$ht loss to rise. c. price to rise' o"tp"t to fall' co#s"mer s"rpl"s to fall' prod"cer s"rpl"s to fall' a#d dead(ei$ht loss to fall. d. price to fall' o"tp"t to rise' co#s"mer s"rpl"s to rise' prod"cer s"rpl"s to fall' a#d dead(ei$ht loss to fall. e. price to rise' o"tp"t to fall' co#s"mer s"rpl"s to fall' prod"cer s"rpl"s to rise' a#d dead(ei$ht loss to rise. 18. 0rice discrimi#atio# leads to a 22222222 price i# the mar&et (ith a 22222222 dema#d. a. hi$her5 less elastic b. hi$her5 more elastic c. hi$her5 perfectly elastic d. lo(er5 less elastic e. lo(er5 perfectly i#elastic

16. The mai# reaso# a mo#opoly e#$a$es i# price discrimi#atio# is that, a. it (a#ts to discrimi#ate a$ai#st a partic"lar eth#ic $ro"p. b. doi#$ so creates a fa orable p"blic opi#io# to(ard the firm. c. it (a#ts to disco"ra$e pote#tial competitors. d. by char$i#$ a lo(er price to some people' it may s"cceed i# disco"ra$i#$ efforts to re$"late it. e. doi#$ so i#creases its profits. 20. $uantit% o# 1ats Price 0emanded per 1at 0 $30 1 28 2 26 3 24 4 22 5 20 6 18 7 16 8 14 Table: Prices and 0emands 0rof. :"mbler has a mo#opoly o# ma$ic hats. ;e sells at most o#e hat to each c"stomer' a#d the table sho(s each c"stomer's (illi#$#ess to pay. The mar$i#al cost of prod"ci#$ a hat is $18. A"ppose :"mbler ca# perfectly price discrimi#ate. ;o( ma#y hats (ill he prod"ce) a. three b. fo"r c. fi e d. si3 e. Ae e#