AP Microeconomics : Short-run Earnings

Study concepts, example questions & explanations for AP Microeconomics

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Example Questions

Example Question #1 : Short Run Earnings

Use the following graph for questions 9 - 11Oranges_demand_curve

Increasing the price of oranges at point D will result in:

  1. An increase in total revenue
  2. A decrease in quantity demanded
  3. Movement toward a portion of the demand curve that is more elastic
Possible Answers:

1, 2, and 3

1 and 2

3 only

2 only 

1 only

Correct answer:

1, 2, and 3

Explanation:

If we are in the inelastic portion of the demand curve, an increase in price will increase TR, since the price effect is greater than the quantity effect. Quantity will still decrease.

Example Question #1 : Short Run Earnings

Use the following graph to answer questions 9-11: Oranges_demand_curve

What is the total revenue generated at point A?

Possible Answers:

10

20

30

24

12

Correct answer:

20

Explanation:

Total revenue is price multiplied by quantity (TR = P x Q). At point A, price is $10 and quantity is 2, so TR = 2 x 10 = 20.

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