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Practice Test 10 - AP Microeconomics

20 questions. Answer them in any order, then submit to see your score and every explanation.

  1. In a competitive labor market for warehouse workers, a new immigration program increases the number of workers willing and able to work in the region. Based on the labor market graph shown, what happens to the equilibrium wage and quantity of labor?
  2. Based on the changes described, a consumer's monthly income rises from $2,000 to $2,200, and the quantity of bus rides demanded falls from 50 rides to 45 rides per month. Using income elasticity of demand (YED), is bus transportation a normal good or an inferior good?
  3. Based on the firm's cost and price information, should the firm produce or shut down in the short run? Assume the firm is a price taker in a perfectly competitive market and is currently producing the profit-maximizing quantity where P=MCP=MC. At the profit-maximizing quantity: market price P=P= 99 dollars per unit, AVC=AVC= 1010 dollars per unit, and ATC=ATC= 1313 dollars per unit.
  4. Based on the firm's cost and revenue information, which statement correctly compares accounting and economic profit? A firm has total revenue of $120,000 and explicit costs of $90,000. The owner could earn $25,000 working elsewhere and uses a building the owner owns that could be rented to another business for $10,000 per year.
  5. A landscaping company produces completed yards per day using labor (workers) as the variable input; equipment is fixed. Based on the production data shown in the table, what is the marginal product of the 5th worker? <table> <tr><th>Labor (L)</th><th>Total Product (TP), yards/day</th></tr> <tr><td>0</td><td>0</td></tr> <tr><td>1</td><td>3</td></tr> <tr><td>2</td><td>7</td></tr> <tr><td>3</td><td>12</td></tr> <tr><td>4</td><td>16</td></tr> <tr><td>5</td><td>19</td></tr> <tr><td>6</td><td>21</td></tr> </table>
  6. Based on the supply curve shown, at the price marked P=5P = 5, what is the quantity supplied on S1S_1?
  7. The long-run supply curve for a perfectly competitive, increasing-cost industry is upward sloping because
  8. Which of the following scenarios best illustrates the concept of opportunity cost for a government?
  9. Suppose the market price for gasoline is set at P1P_1, which is above the market-clearing price. Which of the following describes the resulting market condition and the direction of price pressure?
  10. A single-price monopolist is known to be earning positive economic profit when, at its profit-maximizing level of output, the price is...
  11. The short-run shutdown point for a perfectly competitive firm is the output level at which
  12. If the government imposes a binding price floor in a perfectly competitive market, which of the following will occur?
  13. Based on the changes described, the cross-price elasticity of demand (XED) between smartphones and wireless service plans can be inferred from the following: the price of smartphones rises by 10%, and the quantity of wireless service plans demanded falls by 4%. Are smartphones and wireless service plans substitutes, complements, or unrelated goods?
  14. Based on the income distribution shown, Province M reports the following shares of total annual income by quintile: Bottom 20% = 10%, Second 20% = 15%, Middle 20% = 20%, Fourth 20% = 25%, Top 20% = 30%. Province N reports: Bottom 20% = 2%, Second 20% = 6%, Middle 20% = 12%, Fourth 20% = 20%, Top 20% = 60%. Which distribution shows greater income inequality?
  15. A regional airline is a monopolist on a particular route. It charges $320 for refundable tickets and $180 for nonrefundable tickets that must be purchased at least 14 days in advance. Business travelers are typically willing to pay up to $350 and have less elastic demand, while leisure travelers are typically willing to pay up to $220 and have more elastic demand. The airline enforces the refund and advance-purchase rules to prevent travelers from switching categories after purchase. Based on the monopolist's pricing strategy, which condition makes this pricing strategy possible?
  16. A firm producing 1,000 units of a good has a long-run total cost of 5,000.Ifitincreasesproductionto1,200unitsanditslong−runtotalcostrisesto5,000. If it increases production to 1,200 units and its long-run total cost rises to5,400, what is the firm experiencing over this range of output?
  17. A single-price monopoly results in a deadweight loss because the firm...
  18. Based on the PPC shown, which statement about the slope of the PPC between point A and point B is correct?
  19. A perfectly competitive firm faces a market price of P=$16P=\$16 per unit. At the firm's profit-maximizing quantity, AVC=$11AVC=\$11 and ATC=$16ATC=\$16. Based on the firm's cost and price information, should the firm exit the market in the long run?
  20. An amusement park is the only park in the region. It sells a one-day pass using the following schedule: $60 for 1 pass, $110 for 2 passes, and $150 for 3 passes (all passes are identical). The park cannot observe individual willingness to pay but can enforce the pricing schedule at the ticket booth. Based on the monopolist's pricing strategy, which type of price discrimination is illustrated?

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