ap microeconomics MCQ

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• The local market for bankers is currently in equilibrium. Which of the following increases the local wage paid to bankers?
  ক

  Internet banking at home is becoming more popular.

  খ

  More college students are majoring in finance and economics, majors that make them attractive as bank employees.

  গ

  The price of banking software, a complementary resource to bankers, rises.

  ঘ

  Several banks in the local market merge and consolidate many operations.

  ঙ

  The price of automatic teller machines, a substitute for bankers, decreases and the output effect is greater than the substitution effect.
• Diminishing marginal returns to short-run production begin when
  ক

  the average product of labor begins to fall.

  খ

  the total product of labor begins to fall.

  গ

  marginal product of labor becomes negative.

  ঘ

  average variable cost begins to rise.

  ঙ

  marginal product of labor begins to fall.
• Which of the following is true of the perfectly competitive firm in the short run?
  ক

  The firm earns a normal profit.

  খ

  The firm shuts down if the price falls below average total cost.

  গ

  The firm earns positive economic profit.

  ঘ

  The firm maximizes profit by producing where the price equals marginal revenue.

  ঙ

  The firm may earn positive, negative, or normal profits.
• The table below describes employment and production of a firm that hires labor and produces output in competitive markets. The competitive price of the product is $.50.
  ক

  1st

  খ

  2nd

  গ

  3rd

  ঘ

  4th

  ঙ

  5th
• The elasticity of supply is typically greater when
  ক

  producers have fewer alternative goods to produce.

  খ

  producers have less time to respond to price changes.

  গ

  producers are operating near the limits of their production.

  ঘ

  producers have less access to raw materials necessary for production.

  ঙ

  producers have more time to respond to price changes.
• Which of the following is likely to have a demand curve that is the least elastic?
  ক

  Demand for the perfectly competitive firm's output

  খ

  Demand for the oligopoly firm's output with a homogenous product

  গ

  Demand for the oligopoly firm's output with a differentiated product

  ঘ

  Demand for the monopolistically competitive firm's output

  ঙ

  Demand for the monopoly firm's output
• Land, labor, capital and entrepreneurial talent are often referred to as
  ক

  production possibilities.

  খ

  goods and services.

  গ

  unlimited human wants.

  ঘ

  opportunity costs.

  ঙ

  scarce economic resources.
• If the market for this good was in equilibrium at Q2 but the socially optimal output was Q1, the government could best remedy this —— of resources by legislating a —— on —— of the good.
  ক

  underallocation, per unit tax, consumers

  খ

  overallocation, per unit subsidy, consumers

  গ

  underallocation, per unit tax, producers

  ঘ

  overallocation, per unit subsidy, producers

  ঙ

  overallocation, per unit tax, producers
• Which of the following is the best example of a negative externality and the appropriate plan for eliminating it?
  ক

  Air pollution from a factory blows downwind and harms children in a small community. Tax the citizens of the community.

  খ

  Your neighbor plants a fragrant blooming cherry tree in her front yard. Give a tree subsidy to your neighbor.

  গ

  The waste from a hog farm pollutes a neighbor's drinking water. Give a subsidy to the hog farmer.

  ঘ

  A cigarette smoker suffers multiple health problems from using tobacco. Tax the cigarettes that he is smoking.

  ঙ

  Air pollution from a power plant is blowing downwind and harming the trees in your community. Tax the production of electricity.
• Which of the following is most likely to be true in the long run for a monopoly firm?
  ক

  P = MR = MC = ATC

  খ

  P = MR = MC > ATC

  গ

  P > MR = MC = ATC

  ঘ

  P = MR > MC = ATC

  ঙ

  P > ATC > MR = MC
• What is one reason why the government discourages collusion between large firms in the same industry?
  ক

  Collusive output levels tend to increase, driving the price above competitive levels.

  খ

  Consumer surplus falls as the price is driven downward.

  গ

  Collusive output levels tend to decrease, driving the price down to competitive levels.

  ঘ

  Joint profit maximization drives profits downward, forcing colluding firms to exit the industry.

  ঙ

  Joint profit maximization costs society consumer surplus as the price rises above competitive levels.
• If firms are entering an industry that is monopolistically competitive, we would expect
  ক

  the demand for existing firms to shift rightward.

  খ

  the market price of the product to increase.

  গ

  the demand for existing firms to become more inelastic.

  ঘ

  economic profits to rise for all firms.

  ঙ

  the demand for existing firms to shift leftward.
• Deadweight loss is equal to which of the following areas?
  ক

  abcd

  খ

  cdfg

  গ

  0abQ1

  ঘ

  Q1Q2gh

  ঙ

  bdgh
• If this firm were a profit-maximizing monopolist, the price and output would be which of the following?
  ক

  0a and Q1

  খ

  0c and Q1

  গ

  0e and Q1

  ঘ

  0e and Q2

  ঙ

  0f and Q1
• Which of the following causes the supply curve of paper to shift to the left?
  ক

  Paper producers expect lower paper prices in the months ahead.

  খ

  The price of pencils, a complement to paper, increases.

  গ

  Improvements in the technology used to produce paper.

  ঘ

  Household income falls.

  ঙ

  Environmental concerns reduce the yearly amount of timber that can be harvested.
• Which of the following would best complete a short definition of economics? "Economics is the study of . . ."
  ক

  how unlimited resources are allocated between scarce wants.

  খ

  how money is circulated through the economy.

  গ

  how corporations maximize the share price of their stock.

  ঘ

  how nations trade goods and services in a global marketplace.

  ঙ

  how scarce resources are allocated to satisfy unlimited wants.
• A typical characteristic of capitalist market economies is
  ক

  government ownership of land and capital.

  খ

  extensive price controls.

  গ

  centralized government decision making to determine production limits.

  ঘ

  an absence of scarcity.

  ঙ

  private ownership of economic resources.
• If the perfectly competitive price is currently below minimum average total cost, we can expect which of the following events in the long run?
  ক

  The price will rise and each firm's output will fall as firms exit the industry.

  খ

  Market equilibrium quantity will increase as firms exit the industry.

  গ

  Nothing. The industry is currently in long-run equilibrium.

  ঘ

  Profits will fall as the market price increases.

  ঙ

  The price will rise to the breakeven point as firms exit the industry.
• Monopolistic competition is often characterized by
  ক

  strong barriers to entry.

  খ

  a long-run price that exceeds average total cost.

  গ

  a price that exceeds average variable cost, causing excess capacity.

  ঘ

  a homogenous product.

  ঙ

  many resources devoted to advertising.
• In Figure above, identify the area of consumer surplus.
  ক

  0ACB

  খ

  0FCB

  গ

  AFC

  ঘ

  ACE

  ঙ

  FCE
• The graph in Figure above shows a nation's production possibility curve (PPC) for the production of bread and butter. Which of the following is true?
  ক

  The opportunity cost of producing more butter is a decreasing amount of bread.

  খ

  Point X represents unemployed economic resources.

  গ

  The opportunity cost of producing more butter is a constant amount of bread.

  ঘ

  Point X represents a labor force that has become less productive.

  ঙ

  The opportunity cost of producing more butter is an increasing amount of bread.
• If a firm is hiring labor in the perfectly competitive labor market, the wage and employment are
  ক

  $3 and zero.

  খ

  $4 and 10.

  গ

  $5 and 20.

  ঘ

  $6 and 30.

  ঙ

  $7 and 40.
• With respect to the kinked demand curve, which of the following is NOT correct?
  ক

  There is no price leader.

  খ

  There are relatively equal shares of the market.

  গ

  Price is greater than marginal costs.

  ঘ

  It is a noncollusive model.

  ঙ

  The demand curve is of one continuous function.
• At the profit-maximizing output, which of the following is correct?
  ক

  Economic profits are zero and the firm is operating efficiently.

  খ

  Economic profits are above normal and output is greater than under perfect competition.

  গ

  Economic losses are present.

  ঘ

  Price is less than marginal cost.

  ঙ

  Economic profits are zero and the firm is operating inefficiently.
• If the government provides a subsidy to the producers of coffee, which of the following will occur?
  ক

  A shift to the left of the supply curve.

  খ

  A shift to the left of the demand curve.

  গ

  A move along the supply curve to the right.

  ঘ

  A shift to the right of the demand curve.

  ঙ

  A shift to the right of the supply curve.
• At a market price of $19, how many batteries will the firm produce?
  ক

  20,000

  খ

  29,000

  গ

  36,000

  ঘ

  28,000

  ঙ

  Zero
• Which of the following illustrates the demand curve facing an oligopolist when rival firms follow a price decrease but not a price increase?
  ক

  Perfectly horizontal demand curve.

  খ

  Highly inelastic demand curve.

  গ

  Highly elastic demand curve.

  ঘ

  A demand curve that is tangent to the average total cost curve.

  ঙ

  A demand curve consisting of two discontinuous segments.
• The dead-weight loss is
  ক

  ABG.

  খ

  ACF.

  গ

  BCEG.

  ঘ

  COKE

  ঙ

  GEE
• The total costs for the monopolist are identified by
  ক

  CEFL.

  খ

  CEHG.

  গ

  ABJK.

  ঘ

  EOX1F.

  ঙ

  BOX1J.
• For a polluting steel company, a government action to most likely achieve an optimal or efficient outcome would produce what effect on the market equilibrium price and output?
  ক

  Output would increase; no change in price.

  খ

  Output would increase; price would decrease.

  গ

  Output would increase; price would increase.

  ঘ

  Output would decrease; price would decrease.

  ঙ

  Output would decrease, price would increase.