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AP Microeconomics

Multiple Choice

Section 11 Online Practice Test

Identify the choice that best completes the statement or answers the question.

1.

 Output Total Cost 0 \$10 1 60 2 80 3 110 4 170 5 245 Table: Total Cost and Output

The table describes Bart's perfectly competitive ice cream-producing firm. If the market price is \$67.50, how many units of output will the firm produce?

• a. one

• b. two

• c. three

• d. four

• e. five

Figure 58-1: Marginal Revenue, Costs, and Profits

2.(Figure 58-1: Marginal Revenue, Costs, and Profits) In the figure, if market price increases to \$20, marginal

revenue ________

• a. increases; increases

and profit-maximizing output ________.

• b. increases; decreases

• c. decreases; increases

• d. decreases; decreases

• e. remains constant; remains constant

 Quantity of Apples (bushels) VC 0 \$ 0 1 40 2 70 3 80 4 130 5 190 6 260 7 340 8 430 Table 58-2: Lilly's Apple Orchard
• 3. (Table 58-2: Lilly's Apple OrcharD. Lilly is the price-taking owner of an apple orchard; its variable costs are given in the table. Her orchard has fixed costs of \$30. If the price of a bushel of apples is \$25, how many bushels will Lilly produce to maximize profit?

• a. 0

• b. 1

• c. 2

• d. 3

• e. 4

 Quantity of Lots Variable Costs 0 \$0 10 200 20 300 30 500 40 750 50 1,100 Table 59-1: Variable Costs for Lots
• 4. (Table 59-1: Variable Costs for Lots) During the winter, Alexa runs a snow-clearing service, and snow- clearing is a perfectly competitive industry. Her only fixed cost is \$1,000 for a tractor. Her variable costs per cleared lot, shown in the table, include fuel and hot coffee. What is Alexa's shut-down price in the short run?

• a. \$0

• b. \$15

• c. \$50

• d. \$42

• e. \$20

Figure 59-2: Prices, Cost Curves, and Profits

• 5. (Figure 59-2: Cost Curves and Profits) In the figure, if the market price is \$18 @P2, this firm will:

• a. minimize its losses by shutting down.

• b. minimize its losses by continuing to produce.

• c. break even.

• d. earn an economic profit.

• e. exit the market in the long run.

6.

In the figure, total cost at the profit-maximizing quantity of bushels is \$ ________.

• a. 3.50

• b. 14

• c. 56

• d. 72

• e. 4

7.

The figure shows cost curves for a firm operating in a perfectly competitive market. If the market price is P 4 :

• a. firms will leave the industry and the price will fall in the long run.

• b. there will be economic profits and firms will enter the industry in the long run.

• c. the market supply curve will shift to the left and price will fall in the long run.

• d. the firm will produce q 4 .

• e. the price will rise in the long run as economic profits fall to zero.

• 8. Economic profits in a perfectly competitive industry induce

• a. exit; entry

• b. entry; entry

• c. entry; exit

• d. exit; exit

,

________

• e. entry; shutdown

and losses induce ________.

• 9. Suppose that the market for haircuts in a community is a perfectly competitive constant-cost industry and that the market is initially in long-run equilibrium. Subsequently, an increase in population increases the demand for haircuts. In the long run, we expect that:

• a. more firms will enter the market, driving the price of haircuts up and the profits of individual firms back down to zero.

• b. more firms will enter the market, driving the price of haircuts down and the profits of individual firms back down to zero.

• c. firms will leave the market, driving the price of haircuts up and the profits of individual firms up.

• d. firms will leave the market, driving the price of haircuts up and the profits of individual firms back down to zero.

• e. more firms will enter the market, driving the price of haircuts down and the profits of individual firms up.

10.

 Quantity of Appels (bushels) VC 0 \$ 0 1 40 2 70 3 80 4 130 5 190 6 260 7 340 8 430 Table: Lilly's Apple Orchard

Lilly is the price-taking owner of an apple orchard; its variable costs are given in the table. Her orchard has fixed costs of \$30. If the price of a bushel of apples is \$85, we would expect total industry output to:

• a. rise, and Lilly's output will rise in the long run.

• b. fall, and Lilly's output will fall in the long run.

• c. fall, while Lilly's output will rise in the long run.

• d. rise, while Lilly's output will fall in the long run.

• e. rise, while Lilly's output will remain unchanged in the long run.

• 11. Compared to perfect competition:

• a. monopoly produces more at a lower price.

• b. monopoly produces where MR > MC, and a perfectly competitively firm produces where P = MC.

• c. monopoly may have economic profits in the long run, but in perfect competition economic profits are zero in the long run.

• d. perfect competition may have economic profits in the long run, but in monopoly economic profits are zero in the long run.

• e. monopoly produces where MR = MC, and a perfectly competitively firm produces where P = MR > MC.

• 12. The ability of a monopolist to raise the price of a product above the competitive level by reducing the output is known as:

• a. product differentiation.

• b. barrier to entry.

• c. economies of scale.

• e. market power.

• Figure 61-1: Profit-Maximizing Output and Price

• 13. (Figure 61-1: Profit-Maximizing Output and Price) Assume there are no fixed costs and AC = MC. In the figure, at the profit-maximizing quantity of production for the monopolist, total revenue is

 total cost is ________ , and profit is ________. a. \$600; \$200; \$400
• b. \$1,600; \$3,200; \$1,600

• c. \$4,800; \$3,200; \$1,600

• d. \$4,800; \$1,600; \$3,200

• e. \$1,600; \$800; \$800

,

________

Figure 61-6: Short-Run Monopoly

 14. (Figure 61-6: Short-Run Monopoly) The profit-maximizing output rule is satisfied by the intersection at point: a. G. b. H. c. J. d. L. e. I. 15.

The graph shows a monopoly firm that sells gadgets. If the firm is regulated such that the firm earns zero

economic profit, the firm will sell

• a. Q 1 ; P 1

• b. Q 2 ; P 1

• c. Q 4 ; P 3

• d. Q 3 ; P 2

________

units at a price of

________

per unit.

Figure 62-1: Demand, Revenue, and Cost Curves

• 16. (Figure 62-1: Demand, Revenue, and Cost Curves) The figure shows the demand, marginal revenue, marginal cost, and average total cost curves for Figglenuts-R-Us, a monopolist in the figglenut market. Figglenuts-R-Us will sell

• a. 70; \$65

• b. 100; \$50

________

• c. 120; \$40

• d. 150; \$46

• e. 70; \$30

figglenuts and set a price of

________

to maximize profits.

• 17. Suppose a perfectly competitive market is suddenly transformed into one that operates as a monopoly market. We would expect:

• a. price to rise, output to fall, consumer surplus to rise, producer surplus to rise, and deadweight loss to fall.

• b. price to rise, output to fall, consumer surplus to fall, producer surplus to fall, and deadweight loss to rise.

• c. price to rise, output to fall, consumer surplus to fall, producer surplus to fall, and deadweight loss to fall.

• d. price to fall, output to rise, consumer surplus to rise, producer surplus to fall, and deadweight loss to fall.

• e. price to rise, output to fall, consumer surplus to fall, producer surplus to rise, and deadweight loss to rise.

• 18. Price discrimination leads to a

• ________

price in the market with a

________

• a. higher; less elastic

• b. higher; more elastic

• c. higher; perfectly elastic

• d. lower; less elastic

demand.

• e. lower; perfectly inelastic

 19. The main reason a monopoly engages in price discrimination is that: a. it wants to discriminate against a particular ethnic group. b. doing so creates a favorable public opinion toward the firm. c. it wants to discourage potential competitors. d. by charging a lower price to some people, it may succeed in discouraging efforts to regulate it. e. doing so increases its profits. 20.
 Quantity of Hats Price Demanded per Hat 0 \$30 1 28 2 26 3 24 4 22 5 20 6 18 7 16 8 14 Table: Prices and Demands

Prof. Dumbler has a monopoly on magic hats. He sells at most one hat to each customer, and the table shows each customer's willingness to pay. The marginal cost of producing a hat is \$18. Suppose Dumbler can perfectly price discriminate. How many hats will he produce?

• a. three

• b. four

• c. five

• d. six

• e. Seven