Practice Test 3 - AP Microeconomics

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

Start practice test

1. Which of the following is most likely to be a variable cost for a manufacturing firm in the short run?
2. A town has many gas stations selling a similar product, but each station sets its own price and uses branding (loyalty programs, convenience stores) to attract customers. Entry is possible but requires zoning approval and large startup costs. A separate market in the same town is the market for raw soybeans, with many farmers selling an identical product at a market price. Based on the market characteristics described, which market structure best fits the gas station market?
3. A university is deciding how many additional tutoring sessions to fund for an introductory economics course (each unit is one session). According to the marginal benefit and marginal cost data in the table, what is the optimal number of sessions to fund? <table> <tr><th>Tutoring sessions (Q)</th><th>MB, $</th><th>MC, $</th></tr> <tr><td>1</td><td>1,200</td><td>400</td></tr> <tr><td>2</td><td>1,000</td><td>600</td></tr> <tr><td>3</td><td>800</td><td>750</td></tr> <tr><td>4</td><td>650</td><td>900</td></tr> <tr><td>5</td><td>500</td><td>1,050</td></tr> </table>
4. A significant decline in labor union membership and power within a country can contribute to rising income inequality primarily because it...
5. A perfectly competitive firm is a price taker in both the output and labor markets. The market wage is $W = $95 per worker per hour. The firm's marginal revenue product (MRP) schedule for labor is shown in the table. Based on the firm's MRP and wage, at what employment level is profit maximized? MRP schedule (per hour): - 1st worker: $140 - 2nd worker: $120 - 3rd worker: $100 - 4th worker: $90 - 5th worker: $80
6. The price elasticity of demand for a luxury good, such as a diamond necklace, is generally more elastic than the price elasticity of demand for a necessity, such as bread, because
7. An online textbook platform is a monopolist for a required digital text at a university. It offers a 1-week rental for $18, a 4-week rental for $40, and a 16-week access pass for $95. Students differ in how long they need access, and the platform cannot observe each student's exact willingness to pay. Access codes expire automatically and cannot be transferred. Based on the monopolist's pricing strategy, which type of price discrimination is illustrated?
8. Based on the payoff matrix below (profits in millions of dollars), which strategy is dominant for Firm A? Payoffs are listed as $(\text{Firm A},\ \text{Firm B})$. <table> <tr><th></th><th>Firm B: Advertise</th><th>Firm B: Do Not Advertise</th></tr> <tr><th>Firm A: Advertise</th><td>(30, 30)</td><td>(45, 20)</td></tr> <tr><th>Firm A: Do Not Advertise</th><td>(20, 45)</td><td>(40, 40)</td></tr> </table>
9. If the government imposes a new $5$ per-unit tax on the output of a firm, how will this tax affect the firm's short-run cost curves?
10. In a competitive labor market for baristas, many workers leave the occupation for higher-paying jobs in another industry, reducing the number of workers willing to work as baristas at each wage. Based on the labor market graph shown, what happens to the equilibrium wage and quantity of labor?
11. If an industry has a very large minimum efficient scale relative to the size of market demand, it is likely that the industry will be
12. Based on how resources are allocated in the scenario, which economic system is most consistent with this description? A country's food sector is scarce due to limited farmland. The government owns grain mills, sets annual output goals for flour (what), directs mills to use specified equipment and labor practices (how), and distributes flour to households using monthly ration cards (for whom).
13. A car owner just spent $1,000$ on major repairs. Now, the transmission has failed, and a replacement will cost an additional $2,500$. A similar used car in working condition can be purchased for $3,000$. The rational owner should decide to replace the transmission if the value of the repaired car is
14. A monopolist sells the same prescription drug in two separate markets where resale is prevented by law and packaging differences. Market H (high income) has relatively inelastic demand, while Market L (low income) has relatively elastic demand. The firm sets a single price in each market. Based on the monopolist's pricing strategy, which group is charged the higher price and why?
15. A perfectly competitive industry is in long-run equilibrium. If the government imposes an identical lump-sum tax on all firms in the industry, what will be the effect in the long run?
16. A contagious-disease season increases demand for flu vaccinations, but trained nurses and vaccine doses are scarce, so the country must decide WHAT to produce (how many vaccinations versus other clinic services), HOW to produce (public clinics versus private pharmacies), and FOR WHOM to produce (who receives vaccinations first). In Region 1, private pharmacies order doses from suppliers and set prices; as prices rise, some consumers delay or forgo vaccination, and suppliers ship more doses to that region. In Region 2, the health ministry sets a fixed low price, assigns each clinic an output target, and limits each person to one dose through a registration list. Based on how resources are allocated in the scenario, which economic system is most consistent with Region 2?
17. A primary difference between a single-price monopoly and a perfectly competitive firm is that the monopolist's marginal revenue is...
18. Based on the PPC shown, which statement is true about point E?
19. Given the resource limitation described, a farming community receives a water allotment of 1,000 acre-feet for the growing season. Farmers want to use 800 acre-feet for alfalfa and 600 acre-feet for vegetables, but only 1,000 acre-feet are available. Which statement correctly explains why a choice must be made?
20. A small bakery produces loaves of bread (single output) using labor as the variable input; its ovens and floor space (capital) are fixed. Based on the production data shown, what is the marginal product of the 5th worker? Table: Total Product (TP) of Bread

    Labor (L), workers	Total Product (TP), loaves/hour
    0	0
    1	6
    2	14
    3	24
    4	33
    5	40
    6	45

Practice tests