AP Microeconomics : AP Microeconomics

Study concepts, example questions & explanations for AP Microeconomics

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Example Questions

Example Question #51 : Ap Microeconomics

One characteristic of a public good is non-excludability. Which of the following is an example of a non-excludable good?

Possible Answers:

Clean air

Fish stocks

Satellite television

None of the other answers

BOTH clean air and fish stocks

Correct answer:

BOTH clean air and fish stocks

Explanation:

It is impossible to prevent people from enjoying clean air (assuming the air is clean, of course). Fish stocks are a common resource accessible to all (although there may be some attempts to limit access by government).

You can be excluded from satellite TV if you don't pay for the service.

Example Question #52 : Ap Microeconomics

One characteristic of a public good is non-rivalry. Which of the following goods are NOT non-rivalrous?

Possible Answers:

The freeway network during the morning commute

A poetry reading

A movie theater at 11am on a Wednesday

Law enforcement

Correct answer:

The freeway network during the morning commute

Explanation:

This is an interesting case of a good that is non-rivalrous up to a point. In the middle of the night one additional car on the highway makes no difference to others already on the road. At the morning rush hour, even one car adds delay to a surprising number of drivers upstream.

You can enjoy a poetry reading or the benefits of law enforcement without diminishing the quality for others. The movie theater is the opposite case of the highway. It can definitely be rivalrous at peak times but on Wednesday mornings the theater is likely mostly empty and one additional person makes no difference.

Example Question #53 : Ap Microeconomics

Which of the following best meets the criteria for a public good?

Possible Answers:

A live street performance

A concert at an arena

A fillet of salmon

A membership to a discount warehouse store

Correct answer:

A live street performance

Explanation:

A performance on a public street is both non-excludable and non-rivalrous. A concert in an arena and the discount warehouse store are excludable - you would have to pay to enjoy the benefits. A fillet of salmon is a private good - you would have to pay and by consuming it you would leave less (or none) for the next person.

Example Question #54 : Ap Microeconomics

Consumer income increases at the same time apple growers have pulled in an unexpectedly large harvest? Assuming apples are a normal good and perfect competition, what is the effect on price and quantity in the apple market?

Possible Answers:

Price indeterminate, Quantity decreases

Price increases, Quantity increases

Price decreases, Quantity increases

Cannot determine either price or quantity from information given

Price indeterminate, Quantity increases

Correct answer:

Price indeterminate, Quantity increases

Explanation:

A rise in consumer income would shift the demand curve for apples out while a large harvest would shift the supply curve out. This would unambiguously increase the quantity traded. The price would depend on the relative amount of the shifts and the slopes of the supply and demand curves.

Example Question #55 : Ap Microeconomics

Assuming a perfectly competitive market in equilibrium, which of the following would necessarily result in a lower equilibrium price for apples?

Possible Answers:

The price of a substitute good increases

The wage paid to apple pickers increases AND consumer incomes shrink

A new technology allows apples to be picked and processed at a lower cost

A popular talk show host touts the health benefits of apples

Correct answer:

A new technology allows apples to be picked and processed at a lower cost

Explanation:

A new technology for harvesting/processing apples would shift the supply curve outward, which would necessarily result in a lower market price for apples.

Incorrect answers:

  • Talk show host increases demand => higher price
  • Price of substitute increases => higher demand => higher price
  • Wages increase => lower supply. Lower incomes => lower demand. Net result is lower quantity, ambiguous change in price.

Example Question #56 : Ap Microeconomics

John lives in Los Angeles and usually takes a long-distance bus to visit his family in San Diego.  When John receives a raise at work, he decides he will buy a more expensive ticket for the train next time he visits San Diego. For John, bus travel is most likely a(n)...

Possible Answers:

inferior good

public good

intermediate good

normal good

superior good

Correct answer:

inferior good

Explanation:

Inferior goods are those which a consumers uses less of when his income increases. They tend to be goods which have a higher-quality substitute that becomes affordable as income increases. For John, the train ride may be a faster or more comfortable alternative to the bus ride.

Example Question #57 : Ap Microeconomics

Carol typically buys 6 apples and 4 oranges every week. She receives a 25% raise at work and next week she buys 8 apples and 5 oranges. For Carol, both apples and oranges are most likely a(n)...

Possible Answers:

superior good

inferior good

substitute good

luxury good

normal good

Correct answer:

normal good

Explanation:

Carol's income has increased and she subsequently buys more apples and oranges. Therefore, apples and oranges are normal goods for her.

The first sentence is also true for superior goods. However, a superior good is one in which the proportion of a consumer's budget for a certain good increases with an increase in income. Carol received a 25% raise and subsequently bought 25% more apples and 20% more oranges. Thus, they are normal goods but not superior goods.

Example Question #58 : Ap Microeconomics

Use the following table to answer the question below:

Units

Total Variable Cost

Price

1

10

20

2

18

19

3

24

18

4

28

17

5

30

16

6

33

15

7

38

14

8

44

13

9

52

12

10

61

11

Consider the above cost structure for a theoretical firm. Which of the following is most likely true about this firm?

Possible Answers:

The firm does not make an economic profit

The firm does not make an accounting profit

The firm is a price-taker

The firm is a monopolist

The firm operates in a perfectly competitive marketplace

Correct answer:

The firm is a monopolist

Explanation:

You can infer simply from the decreasing market price that the firm is a price-setter and thus not a price-taker nor in a perfectly competitive market. Of the choices given, that would imply a monopoly, which we would expect to make both an accounting profit and an economic profit.

You can even calculate the marginal revenue so that the MR curve would be declining as characteristic of a monopolist.

Units

Total Variable Cost

Price

MR

1

10

20

20

2

18

19

18

3

24

18

16

4

28

17

14

5

30

16

12

6

33

15

10

7

38

14

8

8

44

13

6

9

52

12

4

10

61

11

2

Example Question #59 : Ap Microeconomics

Use the following table to answer the question below:

Units

Total Variable Cost

Price

1

10

20

2

18

19

3

24

18

4

28

17

5

30

16

6

33

15

7

38

14

8

44

13

9

52

12

10

61

11

Consider the above cost and price schedule for a theoretical firm. Assume the firm has fixed costs of 30. Within the range shown in the table, at what point are the firm's average costs lowest?

Possible Answers:

Correct answer:

Explanation:

Units

Total Variable Cost

Total Cost

Avg. Cost

Price

1

10

40

40

20

2

18

48

24

19

3

24

54

18

18

4

28

58

14.5

17

5

30

60

12

16

6

33

63

10.5

15

7

38

68

9.7

14

8

44

74

9.25

13

9

52

82

9.11

12

10

61

91

9.1

11

Example Question #60 : Ap Microeconomics

Use the following table to answer the question below:

Units

Total Variable Cost

Price

1

10

20

2

18

19

3

24

18

4

28

17

5

30

16

6

33

15

7

38

14

8

44

13

9

52

12

10

61

11

Consider the above cost and price schedule for a theoretical firm with fixed costs of 30. How many units will this firm produce and sell on the marketplace?

Possible Answers:

Correct answer:

Explanation:

In any market structure, firms will produce where marginal revenue = marginal cost. You can use total variable cost and price to deduce both of these figures for this firm (fixed costs are not relevant in the production decision).

Units

Total Variable Cost

MC

Price

MR

1

10

10

20

20

2

18

8

19

18

3

24

6

18

16

4

28

4

17

14

5

30

2

16

12

6

33

3

15

10

7

38

5

14

8

8

44

6

13

6

9

52

8

12

4

10

61

9

11

2

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