AP Microeconomics Review

With respect to the circular flow model, businesses provide households with which of the following?

• taxes and interest

• labor and taxes

• goods, services, and incomes

• public goods and transfer payments

A volcano erupts in Hawaii that destroys or damages many of the orchards that supply the U.S. with pineapples. What will be the effect on price and quantity of pineapples sold, assuming all else is equal?

• Price will rise and quantity will also rise.

• Price will drop and quantity will also drop.

• Price will drop but quantity will rise.

• Price will rise but quantity will drop.

A market that has few barriers to entry, in which products that are not of identical quality and style are sold, and, therefore, firms can make greater-than-normal profits for short periods of time, is BEST described as

• monopolistic.

• oligopolistic.

• perfectly competitive.

• monopolistically competitive

A breakthrough in nanotechnology allows silicon chips for computers to be produced much more quickly and cheaply. If demand for computers remains unchanged, what will be the effect upon market price and supply?

• Both price and supply will rise.

• Both price and supply will fall.

• The supply will rise while the price falls.

• The supply will fall while the price rises.

All of the following are characteristics of perfectly competitive markets EXCEPT

• the firm's prices are kept confidential.

• production is similar in quality.

• there is a large number of buyers and sellers.

• there are few barriers to entering the market.

A minimum price consumers are required to pay for a good or service.

• Price Ceiling

• Market Clearing Price

• Equilibrium

• Price Floor

A maximum price consumers are required to pay for a good or service.

• Price Ceiling

• Equilibrium

• Market Clearing Price

• Price Floor

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

Rent payments and property taxes would be counted as

• total cost
• variable costs
• fixed costs
• marginal costs

According to the Profit Maximizing Formula, how many units should this firm produce?

• 2

• 3

• 4

• 5