AP Micro Midterm

Consumers will buy more of a good when its prices is lower and less when its price is higher.

• Law of Demand

• Law of Supply

• Price Floor

• Price Ceiling

An increase in the price of milk causes a decrease in the demand for cereal. The two products are

• substitutes
• complements
• unrelated
• demand elastic

Because a modest price increase has little or no effect, the demand for the product is

• complementary
• inelastic
• elastic
• unit elastic

The level of profit-maximizing output is reached when marginal cost is

• double marginal revenue
• one-half of marginal revenue
• less than marginal revenue
• equal to marginal revenue

Which of the following best explains why firms experience Increasing Marginal Returns?

• Workers can specialize

• Workers reach the limit of fixed resources

• Managers motivate workers to produce more

• Poor management leads to low motivation

With which worker does this firm begin to experience Diminishing Marginal Returns?

• First

• Second

• Third

• Fourth

What is the best definition for Long Run?

• A period of time in which at lease one resource is fixed

• A period of time in which all resources can change

• A period of 1 to 5 years

• A period of 5 or more years

Shelby is an entrepreneur who has decided to open a small advertising firm. She rents office space at a cost of $25,000 per year, she has employed an assistant at a salary of $30,000 per year, and she incurs annual utility and office supply expenses of $20,000. Her best alternative is to work elsewhere and to earn a salary of $50,000 per year. How much annual revenue must her firm receive so that Shelby earns zero economic profit? 

• $50,000
• $75,000
• $100,000
• $125,000

The image above shows a firm making

• Economic Profit

• Economic loss

• Breaking even

• Shutting down

If the demand for a product is perfectly inelastic, the incidence of tax will be:

• entirely on the buyer

• mostly on the buyer

• entirely on the seller

• mostly on the seller