AP Microeconomics Review

Which of the following would cause an increase in the quantity demanded of tea?

• an increase in the supply of coffee, a substitute

• a decrease in the price of coffee, a substitute

• a decrease in the price of tea

• a decrease in the supply of sugar, a complement

• an increase in the price of sugar, a complement

A new price ceiling set below the equilibrium price in a competitive market with relatively elastic supply and demand would result in which of the following?

• an increase in the quantity demanded and an increase in the quantity supplied

• an increase in the quantity demanded and no change in the quantity supplied

• an increase in the quantity demanded and a decrease in the quantity supplied

• a decrease in the quantity demanded and an increase in the quantity supplied

• a decrease in the quantity demanded and no change in the quantity supplied

For what type of good does a decrease in income lead to an increase in demand?

• a normal good

• an inferior good

• a good with price-elastic demand

• a good with price-inelastic demand

• a good with price-unit-elastic demand

Which of the following curves always falls as output increases?

• the marginal cost curve

• the average variable cost curve

• the average total cost curve

• the average fixed cost curve

• the total fixed cost curve

What is necessarily true about a perfectly competitive market?

• In the long run, economic profits are positive.

• In the short run, there are no fixed costs.

• Productive efficiency will be achieved in the short run.

• Allocative efficiency is not achieved in the short run.

• Productive efficiency will be achieved in the long run.

Which two market structures are characterized by free entry into and exit from the industry in the long run?

• monopolistic competition and monopoly

• monopolistic competition and perfect competition

• monopolistic competition and oligopoly

• oligopoly and perfect competition

• monopoly perfect competition

Firms generally produce the quantity that equates marginal revenue with

• price, because that minimizes average total cost.

• average total cost, because that minimizes total cost.

• average variable cost, because that stabilizes cost.

• marginal cost, because that minimizes average total cost.

• marginal cost, because that maximizes profit or minimizes loss.

For a competitive firm, if marginal revenue exceeds marginal cost at the current level of output and the firm is currently earning economic losses, what can the firm certainly do?

• increase output to ensure economic profits

• decrease output to ensure economic profits

• increase output to reduce economic losses

• decrease output to reduce economic losses

• shut down to reduce economic losses

The price below which a firm in a perfectly competitive industry will shut down in the long run is determined by the minimum of

• marginal cost

• average total cost

• total cost

• total variable cost

• average fixed cost

Which of the following will most likely happen in the market for good X if the price of good X decreases?

• The supply of good X will decrease.

• The demand for good X will increase.

• The quantity demanded for good X will

  increase.

• The demand will decrease and the supply will

  increase.

• The quantity supplied for good X will

  increase.