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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

Figure 58-1: Marginal Revenue, Costs, and Profits 2.(Figure 58-1: Marginal Revenue, Costs, and Profits) In the

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

Quantity of Lots Variable Costs 0 $0 10 200 20 300 30 500 40 750 50
  • 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.

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

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.

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

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.

    • d. patents and copyrights.

    • e. market power.

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

    11. Compared to perfect competition: a. monopoly produces more at a lower price. b. monopoly produces
    • 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

    Figure 61-6: Short-Run Monopoly 14. (Figure 61-6: Short-Run Monopoly) The profit-maximizing output rule is satisfied by

    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.

    Figure 61-6: Short-Run Monopoly 14. (Figure 61-6: Short-Run Monopoly) The profit-maximizing output rule is satisfied by

    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

    Figure 62-1: Demand, Revenue, and Cost Curves 16. (Figure 62-1: Demand, Revenue, and Cost Curves) The
    • 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