Skip to main content
Sign in Create a free account
Varsity Tutors
Sign in Sign up

Practice Test 4 - AP Microeconomics

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

  1. A regulator imposes a binding price ceiling on a natural monopoly. The firm's demand, marginal revenue, and cost curves are shown. Based on the intervention shown, compared to an unregulated monopoly outcome, what happens to output under the price ceiling?
  2. A market for home insulation reduces energy use, which lowers local air pollution (a positive externality). Based on the externality shown in the graph, what is the socially optimal quantity of insulation installations (in thousands per year)?
  3. A widespread pest infestation destroys a significant portion of the world's cocoa crop. In the market for chocolate bars, this event will lead to which of the following changes in equilibrium?
  4. Based on the supply curves shown for solar panels, firms adopt a new production technology that lowers costs. Which change could have caused the shift from S1S_1 to S2S_2?
  5. In the market for concert tickets, the government imposes a price ceiling of $PcP_c = $30. Based on the market graph shown, does the policy create a shortage or surplus, and of what size?
  6. A region has limited vaccine doses in the short run, so vaccines are scarce and officials must decide WHAT to produce (how many doses to distribute now vs later), HOW to produce (distribution sites and staffing), and FOR WHOM to produce (who receives doses first). Under Method 1, the government sets eligibility tiers (e.g., by age and occupation) and assigns doses to clinics; clinics cannot charge different prices for faster access. Under Method 2, clinics can charge market prices for appointments, and doses go to patients who are willing and able to pay. Based on how resources are allocated in the scenario, compared to Method 1, which outcome is most likely under Method 2?
  7. All of the following are potential sources of economies of scale for a firm EXCEPT
  8. Based on the perfectly competitive firm's cost and price information in the table, is the firm earning profit, loss, or normal profit at the profit-maximizing output in the short run? Assume the firm is a price taker with $P = MR = 1616. Cost Table - Fixed cost (FC) = 2828 - Variable cost (VC) by output: Q=0:0Q=0:0, 1:71:7, 2:152:15, 3:243:24, 4:354:35, 5:505:50, 6:706:70
  9. A large corporation finds that as it expands its operations to new regions, its management structure becomes overly bureaucratic and decision-making slows down, increasing the cost per unit of output. This situation is an example of
  10. Suppose a perfectly competitive firm produces 100 units of a good at its profit-maximizing quantity. If the market price is 2020, average total cost is 1515, and average variable cost is 1212, what is the firm's total economic profit?
  11. A private company owns a vending machine in a school hallway. Students must pay to receive a snack, and each snack purchased reduces the number of snacks remaining until the machine is restocked. Based on the characteristics described, which type of good is a snack from the vending machine?
  12. An economist would classify which of the following as a factor of production, or a scarce economic resource?
  13. Based on the trade graph shown, Country I is a small importer of sugar. Under free trade, the world price is PwP_w = $10 per unit. Domestic quantity demanded is 1,000 and domestic quantity supplied is 400. The government replaces free trade with a binding import quota of 300 units, which raises the domestic price to PqP_q = $12. At PqP_q, domestic quantity demanded is 900 and domestic quantity supplied is 600. What is the quota rent, the revenue earned by whoever holds the import licenses?
  14. A diabetic must take a specific amount of insulin each day to live, regardless of the price. From the perspective of this consumer, the demand for insulin is
  15. A market for lawn-care services is illustrated in the graph. Gas-powered mowing creates noise that affects neighbors, a negative externality. Based on the externality shown in the graph, is the market outcome socially efficient?
  16. Based on the firm's cost and revenue information, which statement correctly compares accounting and economic profit? A car-wash earns total revenue of $110,000 and has explicit costs of $85,000. The owner gives up a $20,000 salary elsewhere and uses land he owns that could be leased for $8,000 per year.
  17. Based on the PPC shown, which point represents an unattainable combination of the two goods given current resources and technology?
  18. Based on the firm's cost and revenue information, what is the firm's economic profit? A small gym earns total revenue of $300,000. Its explicit costs are $180,000 for wages and utilities and $40,000 for lease payments on equipment, for total explicit costs of $220,000. The owner gives up a $60,000 job offer and uses $50,000 of personal funds that could earn $5,000 in interest annually (implicit costs total $65,000).
  19. To maximize profit, a firm should continue to hire units of a factor of production as long as the factor's
  20. Two producers, Studio A and Studio B, produce posters (Good X) and logos (Good Y). Based on the labor requirements in the table, which specialization pattern maximizes total output given that each studio has 24 labor hours available per day? Labor requirements (hours per unit): - Studio A: 3 hours per poster or 6 hours per logo - Studio B: 4 hours per poster or 2 hours per logo

Practice tests