AP Microeconomics Unit 2 Practice Test

1) Which of the following is a fundamental economic question?

2) Suppose we observe the price of a product rising and more of the product being bought and sold. This could be a result of

3) Market economies

4) Of the following, which is the best representation of a positive externality?

5) If a capitalist society wants more coffee, then the relative price of coffee will

6) If the relative price of coffee rises due to a change in tastes in a capitalist society, then

7) Allocative efficiency

8) Consider a profit-maximizing firm in a perfectly competitive market with several sellers and several buyers (i.e., the firm is a “price taker” of the goods it sells and a “price taker” of the hourly wages it pays its workers). If a technological innovation made by someone in this firm were to significantly raise the firm’s marginal physical product (but not that of any other firm’s), then this innovation would

9) Prices in capitalist economies are

10) In the market for resources in the circular flow diagram, households

11) In an oligopoly market, firms

12) A price discriminating monopoly differs from a non-discriminating monopoly because a discriminating monopoly

13) If residents of a city oppose a new highway being built through local neighborhoods, what economic concept best describes their opposition?

14) Marginal revenue equals marginal cost at the point where

15) If buyers bid up the price of a good, then

16) If the market for corn is competitive, then

17) Marginal cost always intersects average variable cost at

18) In a command economy

19) Assume a firm hires labor for $15 each and sells its products for $3 each. If the MP of the third worker is 10, which of the following statements would be the most true?

20) In the market for goods and services in the circular flow diagram, households

21) Relative to a competitive product market with the same costs, a monopoly can be expected to involve

22) Clearing lakes and waterways of pollution will result in increased efficiency if

23) The long-run average cost curve

24) The invisible hand

25)

Company A and Company B above operate in a non-collusive oligopolistic market. Each needs to decide whether to have a large or small advertising strategy. According to the data, the dominant strategy for Company A and Company B would be

26)

In the graph above, the shift in the supply curve from S to S1 for ice cream could occur because

27) A competitive firm’s demand for labor is determined directly by

28) A monopoly with a straight, downward-sloping demand curve has a marginal revenue curve that is

29) Scarcity

30) Company A and Company B are competing firms that are deciding whether or not to expand their operations. The payoff matrix provided shows the profit to be earned (expressed in thousands) from any decision that is made. Based on the data provided

31) Compared to a command economy, a capitalist economy emphasizes

32)

For this monopolist, profit is the area represented by

33) A monopoly is less efficient than a perfect competitor because