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Quizzes > High School Quizzes > Social Studies

AP Micro Multiple Choice Practice Quiz

Prepare with Past Exams and Unit 2 Tests

Difficulty: Moderate
Grade: Grade 12
Study OutcomesCheat Sheet
Colorful paper art promoting AP Micro MCQ Blitz, a fast-paced microeconomics quiz for students.

What does the law of demand state?
When price increases, quantity demanded decreases
When price increases, quantity demanded increases
Price and quantity demanded are unrelated
When price decreases, quantity supplied decreases
The law of demand indicates that, ceteris paribus, as the price of a good rises, the quantity demanded falls. This inverse relationship is fundamental to understanding consumer behavior in microeconomics.
What is considered a normal good?
A good for which demand decreases as income increases
A good with inferior quality
A good for which demand increases as income increases
A good that is less preferred when income increases
A normal good is one where demand rises as consumer income increases. This positive relationship distinguishes normal goods from inferior goods in economic analysis.
What does price elasticity of demand measure?
The responsiveness of quantity supplied to a price change
The responsiveness of quantity demanded to a change in income
The responsiveness of quantity demanded to a price change
How market equilibrium adjusts to a change in supply
Price elasticity of demand measures how sensitive the quantity demanded of a good is to a change in its price. This concept is key in understanding consumer reactions to price fluctuations.
What defines market equilibrium?
The situation where quantity supplied equals quantity demanded
The point where supply exceeds demand
The point where demand exceeds supply
A state where both supply and demand are zero
Market equilibrium occurs when the quantity of a good supplied equals the quantity demanded. This balance eliminates inherent pressure for the price to change, assuming all other variables remain constant.
What best describes opportunity cost?
The cost incurred by producing one more unit of output
The benefit of the next best alternative that is forgone when a decision is made
The monetary cost of a resource
The sunk cost of investments
Opportunity cost is the value of the next best alternative sacrificed when making a decision. Recognizing these costs helps in making more informed economic choices by comparing the benefits of available options.
What is consumer surplus?
The difference between the market price and the lowest price producers are willing to accept
The total profit earned by firms in a market
The difference between what consumers are willing to pay and what they actually pay
The gap between supply and demand
Consumer surplus is the net benefit that consumers derive when they pay less than what they are willing to pay for a good. It is depicted as the area above the market price and below the demand curve up to the equilibrium quantity.
How does a binding price ceiling affect a market?
It creates a surplus because supply exceeds demand
It has no effect on market efficiency
It creates a shortage because quantity demanded exceeds quantity supplied
It ensures a balance between supply and demand
A binding price ceiling is set below the equilibrium price and restricts the maximum price allowed in the market. This results in a higher quantity demanded than supplied, leading to a shortage.
What is the result of a binding price floor?
It ensures market equilibrium
It creates a surplus because quantity supplied exceeds quantity demanded
It eliminates excess supply
It reduces producer surplus without changing quantity
A binding price floor is set above the equilibrium price, preventing the market price from falling to equilibrium. This imbalance causes producers to supply more than consumers are willing to purchase, resulting in a surplus.
What does a price elasticity of demand greater than 1 indicate?
Demand is inelastic
Demand is unit elastic
Demand is elastic, meaning consumers are highly responsive to price changes
Supply is more responsive than demand to price changes
When the price elasticity of demand is greater than 1, it means the percentage change in quantity demanded exceeds the percentage change in price. This high responsiveness can significantly affect total revenue when prices fluctuate.
What does marginal cost represent?
The average cost of production
The additional cost of producing one more unit of output
The total fixed cost of production
The sum of all variable costs
Marginal cost is defined as the extra cost incurred by producing one additional unit of output. Firms monitor marginal cost closely to determine optimal production levels and maximize profit.
In a perfectly competitive market, what is true about the role of producers regarding pricing?
Producers have significant control over market prices
Firms set prices based on their individual costs
Producers are price takers and must accept the market price
Firms set different prices in the same market
In perfect competition, individual firms have no power to influence market prices due to the presence of many competitors. They must take the market price as given and adjust their output accordingly.
How does an increase in input prices affect a firm's cost curves?
It shifts the cost curves downward
It has no effect on cost curves
It shifts the cost curves upward, reflecting higher production costs
It only affects the fixed cost component
When input prices rise, the costs of production increase, causing both the marginal and average cost curves to shift upward. This change reflects the higher expense of production and can affect competitiveness and pricing decisions.
What distinguishes a monopoly from perfect competition?
A monopoly has many small firms
A monopoly sells a homogeneous product similar to perfect competition
A monopoly is characterized by a single seller with market power, unlike in perfect competition
A monopoly operates with free entry and exit
A monopoly consists of a single seller who controls the entire market, granting them significant market power to set prices. In contrast, perfect competition features many sellers with no control over market price.
What is the likely effect of imposing a per-unit tax on a good?
It increases consumer and producer surplus
It shifts the supply curve upward, leading to a higher market price and lower quantity sold
It decreases the costs of production
It has no impact on market equilibrium
A per-unit tax raises the cost of production, which shifts the supply curve upward by the amount of the tax. This results in a higher equilibrium price for buyers, a lower equilibrium quantity traded, and a reduction in overall market efficiency.
What is deadweight loss in the context of market interventions?
The revenue generated by the government through taxation
The loss in total surplus that occurs when the market is not in equilibrium
The increased profit for producers due to market distortions
The difference between fixed and variable costs
Deadweight loss is the economic inefficiency that arises when market interventions, such as taxes or price controls, prevent the market from reaching equilibrium. This loss represents the reduction in total surplus that neither the consumer nor the producer receives.
Under what condition does a firm achieve productive efficiency?
When it produces at a level where average total cost is maximized
When it produces output at the minimum point of its average total cost curve
When marginal cost is above average cost
When fixed costs are minimized regardless of output
Productive efficiency is achieved when a firm produces at the lowest possible cost per unit, which occurs at the minimum point of the average total cost curve. This condition ensures that the firm's resources are being used in the most efficient manner.
What is the effect of a subsidy on a market's equilibrium?
It increases market price and decreases quantity
It decreases market price and increases quantity
It shifts the demand curve to the left
It eliminates all externalities in the market
A subsidy lowers production costs or boosts demand, effectively shifting the supply or demand curve. The typical result is a decrease in the equilibrium price and an increase in the equilibrium quantity, stimulating market activity.
How does monopolistic competition lead to excess capacity in the long run?
Firms produce at full capacity due to high demand
Firms incur high fixed costs that force them to produce more than optimal
Firms produce below their efficient scale because of product differentiation, leading to excess capacity
Firms face perfect competition which eliminates excess capacity
In monopolistic competition, firms differentiate their products to gain market power, creating downward-sloping demand curves for each firm. As a result, in the long run, firms produce at a level smaller than the minimum efficient scale, resulting in excess capacity.
In game theory, what describes a Nash equilibrium?
A situation where one player always wins regardless of the opponent's strategy
A set of strategies where no player can benefit by unilaterally changing their strategy
A scenario where all players cooperate voluntarily
A state where players continuously change their strategies
A Nash equilibrium occurs when each player chooses the strategy that is optimal given the strategies chosen by others. At this point, no single player can increase their payoff by unilaterally deviating, leading to a stable strategic outcome.
How do externalities lead to market failure, and what role can government intervention play?
Externalities always lead to government overregulation which causes market failure
Externalities do not affect overall market efficiency and require no intervention
Negative externalities, such as pollution, create social costs not reflected in market prices, and government intervention can correct this by imposing taxes or regulations
Externalities only affect the production process and not market outcomes
Externalities occur when the actions of individuals or firms have unintended side effects on third parties that are not reflected in market prices. Government interventions, such as taxes on negative externalities or subsidies for positive ones, aim to internalize these external costs or benefits and improve market outcomes.
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Study Outcomes

  1. Understand fundamental microeconomic principles, including supply and demand and market equilibrium.
  2. Analyze various market structures to evaluate their effects on pricing and output.
  3. Apply economic theories to real-world scenarios for better decision-making.
  4. Evaluate the impact of government policies on market efficiency and regulation.
  5. Interpret economic data and graphical representations to draw meaningful conclusions.

AP Micro Multiple Choice Cheat Sheet

  1. Price Elasticity of Demand - This formula (%ΔQuantity Demanded ÷ %ΔPrice) shows how buyers react when prices wiggle up or down. A value above 1 means shoppers are super sensitive (elastic), while below 1 means they barely flinch (inelastic). ReviewEcon Formulas
  2. Total Revenue Test - Multiply price by quantity to get total revenue and watch how it shifts when you tweak the price. If revenue jumps after a price increase, demand is inelastic; if it tumbles, demand is elastic. ReviewEcon Formulas
  3. Utility Maximizing Rule - Allocate your budget so that the marginal utility per dollar spent is the same across all goods: (MUA ÷ PA) = (MUB ÷ PB). This clever trick makes sure every dollar gives you maximum satisfaction. Quizlet Flashcards
  4. Cost Concepts - Total Cost (TC) stacks fixed and variable costs (TC = TFC + TVC), Average Total Cost (ATC) spreads TC over each unit (ATC = TC ÷ Q), and Marginal Cost (MC) reveals the cost of producing one more unit (MC = ΔTC ÷ ΔQ). These cost formulas are your toolkit for analyzing how firms decide what and how much to produce. StudyLib Formulas
  5. Market Structures - From perfect competition (many firms, identical products) to monopoly (one boss in town), monopolistic competition (similar but branded goods), and oligopoly (few firms playing strategy games), each structure shapes pricing and output. Spotting these traits helps predict firm behavior and market outcomes. ReviewEcon Study Guide
  6. Comparative Advantage - You've got a comparative advantage when you can produce at a lower opportunity cost than anyone else. Embrace this principle to see why even the best bakers trade bread for someone else's pies. ReviewEcon Study Guide
  7. Production Possibilities Curve (PPC) - This curve maps the max combo of two goods an economy can churn out, highlighting scarcity, opportunity cost, and efficiency like a bright neon sign. Points inside show wasted resources, on the curve show peak performance, and outside are dreams (but also goals!). ReviewEcon Study Guide
  8. Externalities - When production or consumption spills costs or benefits onto bystanders, you've got externalities. Negative cases (pollution) may need taxes, while positives (education) often earn subsidies to boost social welfare. ReviewEcon Microeconomics
  9. Public Goods - Non-excludable and non-rivalrous wonders like national defense or public fireworks show why private markets might underprovide them. Watch out for free-riders and learn why governments often step in to save the day. ReviewEcon Microeconomics
  10. Factor Markets - Here's where labor, land, and capital get bought and sold. Understanding how firms demand these inputs and how wages or rents are set is crucial for decoding income distribution and resource allocation. ReviewEcon Study Guide
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