WorksheetsAP Micro Units 1-4 Review
Total questions: 77
Worksheet time: 49mins
A person should consume more of something when
Marginal cost is equal to marginal benefit
Benefit exceeds cost
Cost exceeds benefit
It is cheese (who doesn’t like cheese?)
The basic economic problem facing all societies is
Opportunity cost
Unemployment
Poverty
Inflation
Human capital includes
the equipment used by a doctor to cure a patient.
the money earned by a salesperson.
the machinery used to weave cloth.
the workers hired to complete a task.
Every time a decision is made between trade-offs,
The opportunity cost of a decision is
the best possible way the question could have been decided.
the most desirable alternative given up for the decision.
the series of alternate decisions that could have been made.
the different ways that a different person might have made the decision.
any other alternative that was not chosen.
Which of the following could cause a PPC to shift left?
New technology
Increase in immigration
More unemployment
Decrease in the labor force
Less inflation
An economy operating on its PPC is always
fully employing all of its resources.
going to avoid scarcity.
not fully employing all of its resources.
a command economy.
able to produce more goods next year.
When resources are equally suited to the production of either of the two goods on a basic production possibilities curve, one would expect the curve to
be linear and demonstrate constant opportunity costs.
bow outward from the origin and demonstrate increasing opportunity costs.
be vertical or horizontal depending on the goods.
bow inward toward the origin and demonstrate decreasing opportunity costs.
Which points on the graph represent efficiency in production?
A, B, and C
None of these points show efficiency.
E
All of these points show efficiency.
D
If the opportunity cost of good X is an increasing amount of good Y, the PPC would be
horizontal
vertical
a straight line
bowed outward
The circular flow model of the economy
shows that households purchase goods and services in the factor market.
shows no relationship between households and businesses in the economy.
shows that money flows from businesses to households in the product market.
shows how profits are made.
highlights the role of economic interdependence in an economy.
Which economic system answers the three basic economic questions through a central authority?
Mixed Economy
All of these systems
Market Economy
Traditional Economy
Command Economy
The government interacts with
only households by taxing and providing transfer payments.
only business by taxing and providing subsidies.
neither households or businesses.
households and businesses through taxing, transfer payments, and subsidies, but provides no goods or services to either entity.
households and businesses through taxing, transfer payments, and subsidies, and also provides goods or services.
Which economic system is best at providing a large variety of goods/services?
None of these systems
Traditional Economy
Market Economy
Communist Economy
Command Economy
The three basic economic questions every society must answer are
How to produce?; how much to produce?; what to produce?
What to produce?; how to produce?; for whom to produce?
none of these combinations.
Where to produce?; how much to produce?; what to produce?
Where to produce?; how to produce?; for whom to produce?
Mutually advantageous terms of trade are
less than one opportunity cost.
always the best deal for both parties.
always between the two opportunity costs.
always a one to one trade.
greater than one opportunity cost.
Country A can produce 200 bushels of wheat and 100 units of textiles. Country B can produce 100 bushels of wheat and 150 units of textiles. Which of the following is true?
Country B should import wheat, while Country A imports textiles.
No country has comparative advantage.
Country A's opportunity cost of a bushel of wheat is 2 units of textiles.
Country A has absolute advantage in both wheat and textiles.
Country A has comparative advantage in both wheat and textiles.
You have comparative advantage when
you can produce more than the other person.
you use less resources than the other person.
you have the lower opportunity cost.
you have the higher opportunity cost.
you are less efficient.
It takes Country A 30 minutes to produce a car and 20 minutes to produce a tank. It takes Country B 12 minutes to produce a car and 10 min to produce a tank. It is true that
Country B should produce both goods.
no one should produce cars.
Country B should produce tanks.
Country A holds no absolute advantage but has the comparative advantage in producing cars.
Country B holds the absolute advantage in the production of both goods and the comparative advantage in the production of cars.
Absolute advantage in input means you
produce the same amount of goods.
use more resources.
produce more goods.
produce less goods.
A consumer is in equilibrium if the marginal utility for the last unit of Good X is equal to the marginal utility for the last unit of Good Y.
True
False
According to the law of diminishing marginal utility, decreasing marginal utility means total utility is also decreasing.
True
False
The optimal consumption rule states that total utility is maximizing when all income is spent and
MU is equal for all goods.
The amount spend on each good is equal.
MUP is equal for all goods.
P/MU is equal for all goods.
MU is as high as possible for all goods.
A decrease in the price of a good
has no effect on the combinations of goods a consumer can purchase.
increases the total utility of the consumer.
has no effect on the total utility of the consumer.
decreases the number of combinations of goods a consumer can buy.
decreases the quantity demanded by the consumer.
If the marginal utility per dollar on the last unit of Good A is 96 utils and the marginal utility per dollar on the last unit of Good B equals 74 utils, then the consumer should purchase more units of Good B and less units of Good A to reach a point of consumer equilibrium.
True
False
Which of the following is true at equilibrium?
The supply schedule is identical to the demand schedule for every price.
The quantity is zero.
The quantity demand is the same as the quantity supplied.
Every consumer who enjoys the good can consume it.
Producers could not make any more of the product regardless of the price.
Which of the following will definitely be true if demand and supply increase at the same time?
The equilibrium price will increase.
The equilibrium quantity will increase.
The equilibrium quantity will decrease.
The equilibrium price will decrease.
The equilibrium quantity may increase, decrease, or stay the same.
Consider the market in the table above. At a price of $2 per unit,
there is a shortage of 600 units.
there is a surplus of 600 units.
there is incentive for the price to fall.
When there is a surplus of a good, we can conclude that
the price will rise.
the market is operating efficiently.
the price is above the equilibrium price.
the current price is below the equilibrium price.
quantity demanded is more than quantity supplied.
Which of the following will lead to an increase in the equilibrium price of product "X"?
An increase in consumer incomes if product "X" is an inferior good
A decrease in the price of good "Y" (a substitute for good "X")
An increase in the price of machinery used to produce product "X".
An expectation by consumers that the price of good "X" is going to fall
A technological advance in the production of good "X"
An increase in the number of buyers and a technological advance will cause
demand to decrease and supply to decrease.
no change in demand and an increase in supply.
demand to increase and supply to increase.
demand to decrease and supply to increase.
demand to increase and supply to decrease.
Suppose the market price of a good has risen and less of the good is being produced and sold. This could be caused by
a decrease in demand.
an increase in demand.
an increase in supply and demand.
a decrease in supply.
A decrease in the price of steel, an input into the production of cars, will
decrease the supply of cars.
increase the quantity demanded for cars.
increase the supply of cars.
decrease the quantity supplied of cars.
decrease the demand for cars.
All of the following will cause a change in supply except
an increase in the number of producers in the market.
a change in consumer income.
a change in the cost of inputs into production.
government regulation, taxes, and subsidies.
a change in production technology.
An expected decrease in the price of computers in the future will
decrease the quantity demanded of computers.
decrease the quantity supplied of computers.
increase the quantity supplied of computers.
decrease the supply of computers today.
An increase in the number of textbook producers will lead to
an increase in textbook prices.
an increase in textbook demand.
a decrease in textbook supply.
an increase in textbook supply.
a movement along the supply curve for textbooks.
Effective price ceilings are inefficient because they
create shortages.
decrease quality.
lead to wasted resources.
create black markets.
do all of these things.
If government regulations increase in the automobile industry, we would expect to see the equilibrium price of automobiles to decrease and the quantity of automobiles sold to decrease.
increase and the quantity of automobiles sold to increase.
decrease and the quantity of automobiles sold to increase.
increase and the quantity of automobiles sold to decrease.
increase and the quantity of automobiles sold to stay the same.
When a competitive market is in equilibrium, total surplus can be increased by I. reallocating consumption among consumers. II. reallocating sales among sellers. III. changing the quantity traded.
I only
I, II, and III
None of the above
At market equilibrium in a competitive market, what must be true?
II. Producer surplus is maximized.
I. Consumer surplus is maximized.
I, II, and III
III only
III. Total surplus is maximized.
A price ceiling is
a maximum legal price a good or service can be sold for. Because it is set below the equilibrium, it will create a shortage.
a maximum legal price a good or service can be sold for. Because it is set below the equilibrium, it causes a surplus.
a minimum legal price a good or service can be sold for. Because it is set below the equilibrium, it causes a surplus.
a minimum legal price a good or service can be sold for. Because it is set above the equilibrium, it causes a shortage.
Deadweight loss
exists at market equilibrium.
does not reflect inefficiency in a market.
exists when the market is in a state of Pareto efficiency.
occurs with price ceilings, but not with price floors.
is present when marginal benefit and marginal cost are not equal.
Price, Quantity Demanded, Quantity Supplied
Consider the market in the table above. At a price of $2 per unit, the quantity purchased will be 1,300 units.
there is a shortage of 600 units.
there is incentive for the price to fall.
the quantity traded is 1,000 units.
there is a surplus of 600 units.
To be effective, a price ceiling must be set I. above the equilibrium price. II. in the housing market. III. to achieve the equilibrium market quantity
I
II
III
None of the above
I, II, and III
When demand for a product decreases, it means
there has been movement to the left along the demand curve.
the demand curve has shifted to the right.
the price decreased and supply will increase.
there will be movement to the right along the demand curve.
less will be purchased at any given price that could prevail in the market.
If the price of cereal increases, then the demand for cereal will decrease.
True
False
Which of the following statements is correct?
A decrease in quantity demanded means a movement along a demand curve to the left.
Price and quantity demanded have a direct relationship.
A decrease in demand means movement along a demand curve to the left.
There is no difference in the meanings of 'decrease in demand' and 'decrease in quantity demanded'.
A decrease in demand means that consumers will buy more of the good at any given price.
According to the law of demand, if the price of smartphones increased, ceteris paribus, the quantity demanded of smartphones would
increase.
the demand for smartphones would increase.
the quantity demanded of smartphones would not change.
the demand for smartphones would decrease.
the quantity demanded of smartphones would decrease.
The Surgeon General announces that eating an apple a day really does keep the doctor away. That is, there are significant health benefits associated with eating apples. In response to this announcement, it is expected that
the equilibrium price will rise and the quantity will fall.
the demand curve will shift to the left.
the supply curve will shift to the right.
both the equilibrium price and quantity will rise.
the equilibrium price will fall and the quantity will rise.
If the price of a good increases by 10% and total revenue stays the same, then the price elasticity of demand for this good over this range of prices must be
(a)
If demand is perfectly elastic, then
quantity supplied does not change when price changes.
the demand curve will be horizontal.
the demand curve will be downward sloping.
quantity demanded will not change in response to a change in price.
the elasticity of demand is -1.
Suppose the market for apples has a price elasticity of 0.43 and the market for pears has a price elasticity of 0.76. A correct comparison of the two markets would be
The market for pears is more inelastic than the market for apples.
The market for pears is elastic compared to the market for apples.
The market for pears is inelastic compared to the market for apples.
The market for pears is more elastic than the market for apples.
no comparison can be made in regard to elasticity.
Suppose the price of a product increases from $10 to $20 and the quantity demanded decreases from 100 units to 90 units. Using the midpoint formula, what is the price elasticity of demand?
6.318
1.2
0.5
0.158
-0.158
Suppose as the price of peaches falls from $3 per pound to $2 per pound, the quantity demanded of peaches rises from 10,000 pounds to 14,000 pounds. Using the midpoint formula, what is the price elasticity of demand?
(a)
If a musician's agent believes that an increase in concert ticket prices will increase total revenue, then the agent must believe that the price elasticity of demand for the concert tickets is
elastic.
inelastic.
greater than 1.
unit elastic.
If the price elasticity of demand is equal to 5, a 2% increase in price will cause the quantity demanded to ______________ by __________ percent.
(a)
A perfectly elastic supply curve is
U-shaped.
horizontal.
positively sloped.
negatively sloped.
vertical.
If an increase in the price of dibbles causes a decrease in the demand for dabbles, then dibbles and dabbles are considered
If the cross-price elasticity between two goods is negative, this means that the two goods are
normal.
inferior.
complements.
substitutes.
luxuries.
If Kylie buys 200 units of good X when her income is $20,000 and 300 units of good X when her income increases to $25,000, her income elasticity of demand, using the midpoint method, is
1.65.
1.8.
0.06.
0.5.
2.00.
Income elasticity of demand
be used to classify goods as complements or substitutes.
can be positive or negative.
can be used to determine how a change in the price of one good impacts the demand for a related good.
can never be negative.
must always be negative because of the law of demand.
Which of the following leads to a more inelastic price elasticity of supply?
Which of the following factors impacts the price elasticity of supply?
Nature of production
General and specific markets
Consumer income
Available substitutes
Urgency of need
The tax burden is heaviest on consumers when demand is
perfectly inelastic.
inelastic.
perfectly elastic.
elastic.
horizontal.
The original equilibrium quantity for a good was 100. After the government institutes a $2 tax, the new equilibrium quantity is 150. What is the total tax revenue?
$200
$100
$300
$500
$0
Deadweight loss does not exist when demand is perfectly elastic.
True
False
Deadweight loss will be greatest when demand is
elastic
equal to zero
inelastic
The original equilibrium price for a good was $10. After the government institutes a $2 tax, the new equilibrium price is $11.50. What is the consumer tax burden?
$11.50
$10.00
$0.50
$1.50
$0.00
The original equilibrium price for a good was $10. After the government institutes a $1 tax, the new equilibrium price is $10.50. What is the producer tax burden?
$0.00
$0.50
$10.00
$11.50
$1.50
Costs that do not change as production levels change are called
fixed costs
marginal costs
variable costs
total costs
Total costs are the sum of
marginal costs.
marginal costs and total variable costs.
total fixed costs and total variable costs.
average fixed costs and average variable costs.
average fixed costs and marginal costs.
Which of the following statements about average costs is incorrect?
Average total cost is greater than average variable cost.
Marginal cost dictates the behavior of average total cost and average variable cost.
Average variable cost is graphed as a u-shaped curve due to increasing and decreasing returns to labor.
The difference between average total cost and average variable cost decreases as output expands.
Average fixed cost increases as output increases.
If a firm is producing zero units of output, then
total cost is zero.
variable cost is equal to total cost.
Variable costs generally:
fall as output expands in the short run.
make up a smaller portion of total cost at high levels of output in the short run.
increase as output expands in the short run.
stay constant as output expands in the short run.
make up a greater portion of total cost at low levels of output in the short run.
Which of the following intersects the average total cost curve and the average variable cost curve at their minimum points?
marginal cost
average product
average fixed cost
total cost
The slope of the total cost curve is:
marginal cost.
total variable cost.
