AP Micro Unit 2 Review Questions

A downward sloping demand curve can be explained by:

I. diminishing marginal utility

II. diminishing marginal returns

III. the substitution effect

IV. the income effect

• I only

• II only

• I and III only

• I and IV only

• I, III and IV only

If hot dogs are an inferior good, an increase in income will result in:

• an increase in the quantity demanded for hot dogs

• an increase in the demand for hot dogs

• a decrease in the quantity demanded for hot dogs

• a decrease in the demand for hot dogs

• no change in the demand for hot dogs

Assume that coal is a normal good. If the price of coal increases and the quantity sold increases, which of the following is consistent with these observations?

• The price of oil, a substitute for coal, increased

• A wage increase was given to coal miners

• New machinery made coal mining more efficient

• Consumers' incomes fell

• The demand curve is inelastic

During a football game, it starts to rain and the temperature drops. The senior class, which runs the concession stand, and is studying economics, raises the price of coffee from 50 cents to 75 cents a cup. They sell more than ever before. Which answer explains this?

• The supply of coffee increased

• The demand curve for coffee was elastic

• The supply of coffee decreased

• The demand for coffee increased

• The demand curve for coffee was inelastic

Which one of the following statements best reflects the law of diminishing marginal utility?

• "I have to have a scoop of ice cream on my pie"

• "I'll never get tired of your cooking"

• "The last bite tastes just as good as the first"

• "I couldn't eat another doughnut if you paid me"

• "I prefer to eat several small meals a day, rather than three large ones"

If the cost of producing automobiles increases, the price, equilibrium quantity, and consumer surplus will most likely change in which of the following ways:

• Price increases, quantity increases and consumer surplus increases

• Price increases, quantity decreases, and consumer surplus increases

• Price increases, quantity decreases, and consumer surplus decreases

• Price decreases, quantity increases, and consumer surplus decreases

• Price decreases, quantity decreases, and consumer surplus decreases

Compare 2011 with 2012 in the chart. Which of the following statements is true.

• Demand has increased

• Supply has decreased

• Demand has increased and quantity supplied has increased

• Demand has increased and supply has decreased

• Demand has increased, quantity demanded has increased and supply has increased

During the 1990s, the price of VCRs fell by about 30 percent, and quantity sold decreased by the same amount. The demand for VCRs must:

• be inelastic

• be elastic

• be unit elastic

• have shifted to the right

• have shifted to the left

Which of the following will occur if a legal price floor is placed on a good below its free market equilibrium?

• Surpluses will develop

• Shortages will develop

• Underground markets will develop

• The equilibrium price will ration the good

• The quantity sold will increase

A marketing survey shows that gate receipts would increase if the price of tickets to a summer rock concert increased, even though the number of tickets sold would fall. What does this imply about the price elasticity of demand for concert tickets?

• Demand is inelastic

• Demand is elastic

• Demand is unit elastic

• Demand is perfectly inelastic

• Demand is perfectly elastic