# AP Microeconomics : AP Microeconomics

## Example Questions

### Example Question #52 : Perfectly Competitive Markets

The following question is based on this table:

What is the marginal cost of producing the fourth good?

Explanation:

Marginal cost is the increase in the total cost of production to produce one additional unit. In this case, we want to determine the marginal cost of producing the fourth good. The total cost for producing three goods is 26 and the total cost for producing four goods is 29. Because total cost increases by 3, 3 is the fourth good's marginal cost.

### Example Question #51 : Perfectly Competitive Markets

The following question is based on this table:

What production level maximizes the firm's profits?

Impossible to determine from the given information.

Impossible to determine from the given information.

Explanation:

The profit maximizing quantity for the production of goods is the level at which marginal cost equals marginal revenue. This table allows us to easily determine the marginal cost of producing the nth good, but it does not give any information about the marginal revenue associated with selling th nth good (i.e. market price of the good).

### Example Question #52 : Competition

Hank has the choice of spending one hour watching TV and making no money, mowing the lawn for $5, or babysitting for$7. If Hank chooses to watch TV, which of the following must be true?

Hank is indifferent between mowing the lawn and watching TV.

Hank is indifferent between mowing the lawn and babysitting.

None of the other statements are true.

The benefit of watching TV is greater than its opportunity cost of $12. The benefit of watching TV is greater than its opportunity cost of$7.

The benefit of watching TV is greater than its opportunity cost of $7. Explanation: Opportunity cost is defined as the value of the best alternative that must be forgone in order to pursue a certain action. In this case, the best alternative to watching TV is babysitting, for which Hank would have been paid$7. Thus, the opportunity cost of watching TV is $7 for Hank. Since he chooses to watch TV, the personal benefit associated with watching TV must be greater than$7 for Hank.

### Example Question #81 : Ap Microeconomics

California trades strawberries in exchange for corn from Iowa. If these states are trading based on opportunity cost, what must be true?

California has an absolute advantage in producing corn, while Iowa has an absolute advantage in producing strawberries.

California has an absolute advantage in producing strawberries, while Iowa has an absolute advantage in producing corn.

California has a comparative advantage in producing corn, while Iowa has a comparative advantage in producing strawberries.

California has a comparative advantage in producing strawberries, while Iowa has an absolute advantage in producing corn.

California has a comparative advantage in producing strawberries, while Iowa has comparative advantage in producing corn

California has a comparative advantage in producing strawberries, while Iowa has comparative advantage in producing corn

Explanation:

Comparative advantage refers to the ability to produce goods at a lower marginal/opportunity cost than another party. Even if one party is better than the other at the production of all goods (absolute advantage), both parties will still gain by trading with each other because of comparative advantage. Thus, in this case, California must have the comparative advantage in producing strawberries, while Iowa must have a comparative advantage in producing corn.  While the two states may or may not have absolute advantages, we have no way of knowing with the information given.  More importantly, the question states that the advantage is based on opportunity costs.  Absolute advantage has nothing to do with this.

### Example Question #51 : Perfectly Competitive Markets

Which of the following is an example of a public good?

A house

A book

Satellite TV

A lighthouse

A lighthouse

Explanation:

A public good is non-rival, which means that one person's consumption of the good does not affect another person's consumption of the same good.  Public goods are also non-excludable, which means that one person cannot prevent another from consuming the good. Among the choices here, the only answer that meets the criteria is the lighthouse, which is both non-rival and non-excludable.

### Example Question #54 : Competition

If the United States trades computers in exchange for cars from Germany, what must be true?

The United States has comparative advantage in producing computers and Germany has comparative advantage in producing cars

The United States has comparative advantage in producing cars and Germany has comparative advantage in producing computers

The United States has absolute advantage in producing cars and Germany has absolute advantage in producing computers

The United States has absolute advantage in producing computers and Germany has comparative absolute in producing cars

The United States has comparative advantage in producing computers and Germany has comparative advantage in producing cars

Explanation:

Comparative advantage refers to the ability of a party to produce a particular good at a lower opportunity cost than another party. When trading, countries will always gain by trading the good in which they have comparative advantage in producing. Since the US is trading computers for cars from Germany, the US must have comparative advantage in computer production while Germany has comparative advantage in car production.

### Example Question #55 : Perfectly Competitive Markets

An increase in the demand of a good will increase equilibrium price to a greater extent:

if the good's supply curve is more elastic

if the good's supply curve is less elastic

if the good is a normal good

if the good is a giffen good

if the good is a luxury good

if the good's supply curve is more elastic

Explanation:

Elasticity is a measurement used in economics to show the responsiveness of the quantity supplied of a good to a change in its price. Thus, a more elastic supply curve would cause a greater change in price as the quantity demanded increases.

### Example Question #56 : Perfectly Competitive Markets

A leftward shift in the supply curve of computers could be explained by:

An improvement in the technology used for manufacturing computers

A decrease in the price of monitors used to manufacture computers.

An increase in the price of computers

An increase in wages for workers who manufacture computers

An increase in population

An increase in wages for workers who manufacture computers

Explanation:

The only factor that would cause a leftward shift of the supply curve of computers is the increase in wages for workers who manufacture computers. The other choices would result in a rightward shift of the supply curve.

### Example Question #81 : Ap Microeconomics

The difference between the price that a person would be willing to pay for a cupcake and the actual market price of a cupcake is a measure of his/her:

marginal cost

consumer surplus

marginal revenue

total surplus

producer surplus

consumer surplus

Explanation:

The difference between a consumer's willingness to pay and the actual market price of a product quantifies the consumer surplus associated with that product. It occurs when the consumer is willing to pay more for a product than its current market price. For example, if a consumer is willing to pay $3 for a cupcake, but its market price is$2, then the consumer surplus for him/her is \$1.

### Example Question #82 : Ap Microeconomics

Which of the following is a source of monopoly power?

Antitrust laws

Perfect competition

Demand elasticity

Barriers to entry

Free markets