AP Microeconomics Practice Test

1. A production possibility curve might be shifted outward by each of the following EXCEPT;

1. Increase in immigration

2. Movement toward a more open approach to free trade

3. Decrease in unemployment

4. Increase in educational levels of the general population

5. All of the above would shift the PPC outward

2. A production possibility frontier that is represented by a straight line rather than the usual bowed shape would indicate;

1. Increasing opportunity cost

2. Decreasing opportunity cost

3. Constant opportunity cost

4. Absolute and Comparative Advantage

5. Comparative but not absolute advantage

Figure 1

3. If the current price for the perfectly competitive firm represented in Figure 1 is $10.00, what would be the result of an increase in fixed cost on the firm’s profit maximizing price and quantity?

1. Price increase and Quantity increase

2. Price increase and Quantity decrease

3. Price constant and Quantity constant

4. Price decrease and Quantity decrease

5. Price decrease and Quantity increase

Figure 2

4. Which of the graphs shown in Figure 2 correctly demonstrate the concept of increasing opportunity cost?

1. A

2. B

3. C

4. D

5. E

5. If a legal price ceiling is established on a good above the existing equilibrium price, the effect would be to:

1. Raise the price of the good and lower the quantity purchased

2. Have no effect on the price or quantity of the good

3. Lower the price of the good and lower the quantity purchased

4. Raise the price of the good and raise the quantity purchased

5. Lower the price of the good and increase the quantity purchased

Figure 3

6. Chasey Company Inc. is the only producer in a small town. Cost and revenue information for the Chasey Company are shown in Figure 3. Chasey Company would set the price of its product at;

1. $7.50

2. $6.00

3. $4.50

4. $3.75

5. $3.00

7. In Figure 3 the Chasey Company would maximize profits by producing a quantity of;

1. 60

2. 100

3. 120

4. 140

5. 170

8. In Figure 3 the Chasey Company will make a profit of _______;

1. $750

2. $450

3. $300

4. $150

5. $150 loss

Figure 4

Number of workers Output

0 0

1 5

2 11

3 19

4 25

5 29

6 31

7 31

8 30

9. Figure 4 represents production data for a perfectly competitive firm. Based on that data, the marginal physical product of the 4^th worker is;

1. 4

2. 6

3. 8

4. 25

5. 60

10. In Figure 4 the “law of diminishing returns” sets in with the addition of the _____ worker.

1. 1

2. 2

3. 4

4. 7

5. 8

11. Using the data in Figure 4, if workers are paid $35 and the product being produced sells for $10, how many workers would the Chasey Company hire?

1. 1

2. 4

3. 5

4. 7

5. 8

Figure 5

12. The profit-maximizing price for a perfectly competitive firm like the one shown in Figure 5 in the long run would be;

A. A

B. B

C. C

D. D

E. E

13. In Figure 5 at a market price of A, the profit-maximizing output for a perfectly competitive firm is

1. 0

2. 1

3. 2

4. 3

5. 4

14. Which of the following correctly describes the profit maximizing position for all firms regardless of the market structure under which they are operating?

A. P = MC

2. P = ATC

3. MR = MC

4. MR = P

5. MR = AR

Figure 6

15. Which of the graphs in Figure 6 indicate that a firm can sell any or all of its output at the prevailing market price?

A. A

B. B

C. C

D. D

5. It is impossible to determine the correct answer to the question from the information given.