AP Microecon Final

Which of the following is a defining characteristic of a market economy?

• Private ownership of resources

• Equitable distribution of income

• Taxation of personal income

• Reliance on public goods

• Government-guided resource allocation

The table above shows the maximum possible output combinations of good X and good Y that Microland can produce by using all of its available resources and technology. As the production of good X increases, what happens to the opportunity cost of producing good X?

• It decreases, because the production of good Y decreases by greater amounts.

• It decreases, because the production of good Y increases by smaller amounts.

• It remains constant, because the production of good X increases by the same amount.

• It increases, because the production of good Y decreases by greater amounts.

• It increases, because the production of good Y increases by smaller amounts.

An increase in the supply of good X resulted in an increase in the price and quantity of good Y. It can be concluded that good Y is

• (A) an inferior good

• (B) a luxury good

• (C) a normal good

• (D) a substitute for good X

• (E) a complement for good X

Which of the following will shift the supply curve for apples to the right?

• (A) An increase in consumers’ income

• (B) An increase in the price of apples

• (C) An increase in the wages of apple pickers

• (D) A decrease in the rental price for apple harvesting equipment

• (E) A decrease in the demand for oranges, a substitute in consumption

Which of the following relationships among the price elasticity of demand, change in price, and change in total revenue is consistent?

• (A) Elastic, Increase, Increase

• (B) Elastic, Decrease, Decrease

• (C) Unit Elastic, Decrease, Decrease

• (D) Inelastic, Decrease, Increase

• (E) Inelastic, Decrease, Decrease

Which of the following best describes how a consumer maximizes total utility from the consumption of a bundle of goods and services?

• (A) By choosing the quantity of each good such that the quantity demanded of each good is equal to the quantity supplied

• (B) By choosing the quantity of each good such that the marginal utility from each good is equal to zero

• (C) By choosing the quantity of each good such that the price is equal to the marginal revenue

• (D) By choosing the level of output where marginal revenue is equal to marginal cost

• (E) By choosing the combination of goods such that the marginal utility per dollar spent on the last unit of each good is equal

The marginal benefit of consuming a good is

• (A) the change in average utility that results from consuming one more unit of the good

• (B) the same as the total benefit

• (C) equal to the marginal cost of the good

• (D) the change in total expenditures as a result of buying one more unit of the good

• (E) the maximum amount a consumer is willing to pay for one more unit of the good

The economic concept of total consumer surplus refers to which of the following?

• (A) The difference between the quantity of a good or service that people purchase and the amount that they actually consume

• (B) The overproduction of goods and services relative to the socially optimal level of output

• (C) The sum of the differences between the prices that consumers are willing to pay for a good or service and the price they actually pay

• (D) The sum of the differences between the prices that consumers are willing to pay for a good or service and the minimum prices that sellers must receive to offer that quantity

• (E) The difference between the quantity demanded and the quantity supplied of a product at a given price

The table below is partially filled in with the different types of costs for a firm. Based on the information in the table, what is the marginal cost of producing the second unit?

• (A) $50

• (B) $60

• (C) $70

• (D) $90

• (E) $180

How many units of output should a firm with the cost and demand curves shown above produce to maximize profit?

• 0

• Q1

• Q2

• Q3

• Q4