AP Microeconomics-Unit 2:Teacher MCQ-7

If the value of the price elasticity of supply for a product is 0.5, which of the following statements is correct?

(A) A 10 percent increase in the price of the product will decrease the quantity supplied by 5 percent.

(B) A 10 percent increase in the price of the product will decrease the quantity supplied by 20 percent.

(C) A 10 percent increase in the price of the product will increase the quantity supplied by 20 percent.

(D) A 20 percent decrease in the price of the product will decrease the quantity supplied by 10 percent.

(E) A 20 percent decrease in the price of the product will decrease the quantity supplied by 40 percent.

answer D

A market supply curve is more elastic in the long run than in the short run because

(A) producers' marginal costs are increasing

(B) the quantity demanded increases at a steady rate

(C) there are no fixed inputs in the long run

(D) of constant returns to scale in production

(E) of diseconomies of scale in production

answer C

Which of the following best illustrates the concept of consumer surplus?

(A) A thirsty athlete pays $0.85 for a cold drink when she would have gladly paid $1.50 for the drink.

(B) An individual who is willing to accept a job at $7.50 per hour is offered $7.00 per hour.

(C) An individual pays the sale price of $15.00 for the same shirt that the individual refused to purchase earlier at $18.00.

(D) An individual finds that the price of artichokes, a food she dislikes, has been reduced by 50 percent.

(E) A wood-carver has a marginal cost of $5.00 for a unit of output, but sells that unit at $6.00.

answer A

Total economic surplus will be maximized at which of the following price and quantity combinations?

(A)P3 and Q3

(B)P3 and Q1

(C)P2 and Q2

(D)P1 and Q1

(E)P1 and Q3

answer C

Suppose the government sets a price floor at $9 in the market. The resulting consumer surplus, producer surplus, and deadweight loss will be which of the following?

(A)Consumer Surplus:B + E

Producer Surplus: C + F

Deadweight Loss: A + B

(B)Consumer Surplus:A + B

Producer Surplus: C + D

Deadweight Loss: E + F

(C)Consumer Surplus:A

Producer Surplus: C + D+ F

Deadweight Loss: E

(D)Consumer Surplus:A + B+ E

Producer Surplus: C + D+ F

Deadweight Loss: 0

(E)Consumer Surplus:A

Producer Surplus: B + C + D

Deadweight Loss:E + F

answer E

The efficient market outcome shown in the graph provided is

(A) at price P1, quantity Q1, and total economic surplus is J+K

(B) at price P2, quantity Q2, and total economic surplus is B+C+D+E+F+G+H+I

(C) at price P0, quantity Q0, and total economic surplus is B+C+E+F

(D) at price P0, quantity Q0, and total economic surplus is A+B+C+E+F

(E) at price P0, quantity Q0, and total economic surplus is A+B+C+E+F+J

answer E

When the market is in equilibrium, the total economic surplus is equal to area

(A) f + k

(B) f + g + i + k

(C) g + h + i + j

(D) f + g + h + i + j + k

(E) f + g + h + i + j + k + l + m

answer D

If a price ceiling is set at P1, which of the following areas represent the resulting consumer surplus, producer surplus, and deadweight loss?

(A)Consumer Surplus:f

Producer Surplus: k

Deadweight Loss: l + m

(B)Consumer Surplus:f + g + h

Producer Surplus: k + l

Deadweight Loss: h + j

(C)Consumer Surplus:f + g + h

Producer Surplus: i + j + k

Deadweight Loss: l + m

(D)Consumer Surplus:f + g + i

Producer Surplus: k

Deadweight Loss:h + j

(E)Consumer Surplus:f + g + i

Producer Surplus: h + j

Deadweight Loss:l + m

answer D

A decrease in raw material prices will change the equilibrium price and quantity in a market in which of the following ways?

(A)Price Quantity

Increase Increase

(B)Price Quantity

Increase Decrease

(C)Price Quantity

Decrease Increase

(D)Price Quantity

Decrease Decrease

(E)Price Quantity

No change Increase

answer C

A decrease in the supply of oranges raised the price of oranges in the market. The substitution effect of the price increase will motivate consumers to

(A) raise their real income to offset the price effect

(B) decrease their demand for oranges

(C) demand that the government set a price ceiling for oranges

(D) increase the quantity of other fruits demanded and decrease the quantity of oranges demanded

(E) decrease the quantity of other fruits demanded and increase the quantity of oranges demanded

answer D

The graph above shows the market demand for good X. A movement from point A to point B would most likely be caused by

(A) an increase in the price of good Z, a substitute

(B) an increase in consumers' income

(C) a decrease in consumers' income

(D) a decrease in production costs for good X

(E) a decrease in the supply of good X

answer D

The graph above shows the supply and demand curves for a particular brand of computers. In 1988, 10,000 computers were sold for $1,000 each, but in 1989, 9,000 computers were sold for $1,000 each. Which of the following changes in the supply and demand curves could most likely have caused this change?

(A)Demand Curve: Shift right

Supply Curve: Shift right

(B)Demand Curve: Shift right

Supply Curve: Shift left

(C)Demand Curve: No change

Supply Curve: Shift left

(D)Demand Curve: Shift left

Supply Curve: Shift left

(E)Demand Curve:Shift left

Supply Curve:No change

answer D

In the market shown in the graph above, at a price of $5, there will be

(A) a surplus and the price will eventually fall

(B) a surplus generating a decrease in demand

(C) a shortage and the price will eventually rise

(D) a shortage generating an increase in supply

(E) an increase in supply and a decrease in demand

answer A

The diagram above shows the demand and supply curves for a normal good. The equilibrium price could rise from P1 to P2 if

(A) consumers' incomes increased

(B) P2 were set as a legal maximum

(C) subsidies on the product increased

(D) the price of a complementary product increased

(E) costs of production were substantially lowered

answer A

On the basis of the graph above, which of the following statements concerning changes in the demand for and supply of tomatoes is correct?

(A) If both the demand and supply increase, the price of tomatoes will definitely increase.

(B) If both the demand and supply decrease, the quantity of tomatoes sold will definitely increase.

(C) If the demand decreases while the supply increases, the price of tomatoes sold will definiftely increase

(D) If the demand decreases while the supply increases, the quantity of tomatoes sold will definitely decrease.

(E) If the demand increases while the supply decreases, the price of tomatoes will definitely increase.

answer E

Assume that consumers consider potatoes to be an inferior good, but consider rice to be a normal good. An increase in consumers' incomes will most likely affect the equilibrium price and quantity of potatoes and rice in which of the following ways?

answer A

Assume that more corn is used to produce ethanol. Simultaneously, more effective control of pests and weeds occurs in farming. Which of the following will definitely occur in the corn market?

(A) The price of corn will increase.

(B) The quantity of corn will decrease.

(C) The price of corn will decrease.

(D) The quantity of corn will increase.

(E) The supply of corn will decrease.

answer D

Assume that mustard and ketchup are considered substitutes by consumers. If the price of mustard increases, which of the following graphs represents the most likely response in the ketchup market?

answer C

Assume that popcorn and movie attendance are complements and that Salty Concession grows corn suitable for popping. Mr Concession will most likely sell a greater quantity of popping corn at a higher price if which of the following occurs?

(A) The wages of farm workers and movie theater employees increase.

(B) A technological improvement results in less expensive and more efficient harvesting of corn.

(C) The introduction of new fat-free potato chips provides new competition in the snack-food market.

(D) The release of three summer movies sets records for movie attendance

(E) New government regulations force movie theaters to hire more security guards at each theater.

answer D

Assume that the government increases the unit excise tax on gasoline suppliers and also that people commute longer distances to work as more houses are built in city suburbs. As a result, the equilibrium price and quantity of gasoline will most likely change in which of the following ways?

(A) Price Quantity

Decrease Decrease

(B)Price Quantity

Increase Decrease

(C)Price Quantity

Increase Increase

(D)Price Quantity

Increase Indeterminate

(E)Price Quantity

Indeterminate Increase

answer D

Assume that the market for beef is perfectly competitive and in equilibrium. Which of the following would most likely result in an increase in both the equilibrium price and the equilibrium quantity of beef?

(A) An increase in the supply of chicken, a substitute good

(B) A decrease in consumers' income, assuming that beef is a normal good

(C) An increase in the supply of potatoes, a complementary good

(D) An increase in the price of corn, an input in the production of beef

(E)An announcement by the medical community that consumption of beef increases the risk of heart disease

answer C