AP Micro - Interpreting Graphs

Front

What does point A represent?

Back

An efficient level of production

Answer explanation

Point A represents an efficient level of production because it is on the production possibilities frontier, indicating the maximum output possible given available resources.

Front

What does point F represent?

Back

An inefficient level of production

Answer explanation

Point F represents an inefficient level of production because it is below the production possibilities frontier, indicating resources are not fully utilized.

Front

What does point W represent?

Back

An impossible level of production

Answer explanation

An impossible level of production is represented by point W as it falls outside the production possibilities frontier, indicating unattainability.

Front

If a price floor were imposed on this market at the horizontal line shown, what happens?

Back

There will be a surplus of goods

Answer explanation

If a price floor is imposed above the equilibrium price, it creates a surplus of goods as quantity supplied exceeds quantity demanded.

Front

If a price ceiling were imposed on this market at the horizontal line shown, what happens?

Back

The ceiling is not binding at that price

Answer explanation

The ceiling is not binding at that price

Front

If a price ceiling were imposed on this market at the horizontal line shown, what happens?

Back

There will be a shortage of goods

Answer explanation

There will be a shortage of goods

Front

In a competitive market at equilibrium, who benefits?

Back

Both producers and consumers benefit from voluntary exchange

Answer explanation

Both producers and consumers benefit from voluntary exchange because it allows them to engage in transactions that maximize their individual welfare.

Front

As more units are produced, what continues to decline? Options: Marginal costs, Average total costs, Average variable costs, Average fixed costs

Back

Average fixed costs continue to decline.

Answer explanation

As more units are produced, the fixed costs are spread over a larger number of units, causing the average fixed costs to decline.

Front

What market structure is indicated by this graph?

Back

Perfect Competition

Answer explanation

The graph indicates perfect competition because it shows many firms producing identical products with no barriers to entry or exit, leading to a situation of price-taking behavior.

Front

At Qe this firm is

Back

allocatively and productively efficient

Answer explanation

At Qe, the firm is both allocatively and productively efficient, meaning it is producing at the lowest cost and allocating resources optimally.