AP Microeconomics Unit 2 Practice Test 2026 Questions Answers

Last Updated on June 30, 2026

AP Microeconomics Unit 2 (Demand and Supply) Practice Test 2026 Questions and Answers. Supply and demand are fundamental to the study of economics, and understanding them is essential for performing well on both the AP Micro and Macro exams.

At the heart of economics is the role of prices in decision-making and in the allocation of scarce resources through supply and demand. Mastering the basics of supply and demand makes essential concepts in AP Micro much easier to understand. This chapter will cover the basics of supply and demand in detail and, with a little effort, make common sense simple.

AP Microeconomics Unit 2 Practice Test

AP Microeconomics Practice Test
Unit 2: Supply and Demand
Total Items: MCQ (33)
Time Limit: N/A

1) In an oligopoly market, firms

cannot earn economic profits

are interdependent

are not subject to antitrust legislation

are large in number

have no market power

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

a monopoly produces more output and sells for a higher price

a monopoly produces less output and sells for a higher price

a monopoly can make profit in the short run but not in the long run

a perfect competitor breaks even in the short run and the monopoly does not

a monopoly is allocatively efficient whereas the perfect competitor is productively efficient

3) 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

Company A has a dominant strategy and Company B does not.

Company B has a dominant strategy and Company A does not.

Neither company has a dominant strategy and a Nash equilibrium exists.

Both companies have a dominant strategy and a Nash equilibrium exists.

Company A and Company B should expand their operations.

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

fall

rise

not necessarily change.

remain unchanged.

change indeterminantly.

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

less coffee will be consumed.

more resources will be devoted to coffee production.

less tea will be consumed.

suppliers will bring less to market.

the price will eventually return to where it was prior to the change in tastes.

6) Scarcity

implies nonoptimal resource deployment.

applies to some, but not all, resources.

is an issue in every economy.

exists in command economies only.

is eradicated by the invisible hand.

7) Marginal revenue equals marginal cost at the point where

total revenue is greater than total cost at its greatest distance

total revenue is equal to total cost

marginal product is at its highest point

total product is at its highest point

average total cost is at its minimum

8) Prices in capitalist economies are

unfair

determined in competitive markets.

determined, in most cases, by the federal government.

a reflection of our basic values.

a means to achieve equality.

9) Market economies

rely on markets to coordinate economic activity.

rely on the government to address the fundamental economic questions.

rely on elected officials to make the most important economic decisions.

rely on courts to ensure people and firms get what they deserve

are more equitable than command economies.

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

upward sloping

halfway between the demand curve and the vertical axis

initially downward sloping and then upward sloping

parallel to the demand curve

parallel to the vertical axis

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

get wages and profits from firms.

get goods and services from firms.

send only land and labor to firms.

send land, labor, and capital to firms.

send labor to firms

12) The long-run average cost curve

is always below the short-run average cost curve

is always above the short-run average cost curve

always intersects the short-run average cost curve at the minimum of short-run average cost

is above the short-run average cost except at one point

is below the short-run average cost except at one point

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

get goods and services from firms.

send only labor to firms.

send only land and labor to firms.

send land, labor, and capital to firms.

send spending to firms.

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

sellers will try to bring more of it to market.

sellers will bring less to market anticipating less demand at the higher price.

fewer resources will be devoted to its production.

they must not want it.

its price will eventually fall back to normal.

15) If the market for corn is competitive, then

it is difficult for new suppliers to join in.

buyers will get all they want at a good price.

the market favors buyers.

the market is fair.

there must be many buyers and sellers.

16) In a command economy

the market dictates the answers to the fundamental economic questions.

competition helps answer the fundamental economic questions.

state and local governments respond to the fundamental economic questions

the central government dictates the answers to the fundamental economic questions

laws are set up to answer the fundamental economic questions.

17)

For this monopolist, profit is the area represented by

P1OAC

triangle P3PD

triangle DBE

POFB

PDEP2

18) 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?

The firm should hire more labor so that the MRPL will increase

The firm should hire more labor so that the MRPL will decrease

The firm should hire less labor so that the MRPL will increase

The firm should hire less labor so that the MRPL will decrease

The firm should do nothing because it is currently maximizing profit.

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

Enjoying the beauty of a neighbor’s meticulously cared for flowers

Using high-speed Internet access

Paying for a ticket to a sporting event

Being disturbed from a neighbor’s loud music

Getting a car ride from a friend

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

a decrease in the supply of the product.

an increase in the supply of the product.

an increase in demand for the product.

a decrease in demand for the product.

a shortage.

21)

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

Company A small, Company B small

Company A small, Company B large

Company A large, Company B small

Company A large, Company B large

There is no dominant strategy for A or B.

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

Who will get how much of each good and service?

Who should pay taxes?

Who will work?

Who will make the economic decisions?

Who will be allowed into the economy?

23) 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

reduce the firm’s employment level, because fewer workers are now needed

raise the workers’ hourly wage as they now contribute more marginal revenue

lead the firm to hire more workers but not to raise their wages

lead the firm to hire more workers and to pay them higher wages

None of the above

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

equity

planning.

efficiency

centralization.

human rights.

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

more deadweight loss

lower prices

higher production levels

more firms

higher-quality products

26) The invisible hand

works in command economies as well as capitalist economies.

works in capitalist societies.

s concerned with resource allocation when markets are regulated.

refers to regulation in command economies.

requires altruism.

27) Marginal cost always intersects average variable cost at

the profit-maximizing quantity

the minimum of marginal cost

the maximum of average variable cost

the minimum of average variable cost

the maximum of marginal cost

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

has a demand curve that is more elastic than a non- discriminating monopoly

earns less revenue than a non-discriminating monopoly

earns more revenue than a non-discriminating monopoly

will produce less than a non-discriminating monopoly

has a marginal revenue curve that is less than a non- discriminating monopoly

29)

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

consumer incomes declined and ice cream is an inferior good

the price of ice cream rose

chocolate sauce production increased

the cost of milk, which is used in the production of ice cream, fell

the cost of milk, which is used in the production of ice cream, rose

30) Allocative efficiency

implies optimal resource deployment.

means no inferior products will be produced.

ensures the distribution of output is equitable.

can only occur in pure command economies.

defies the idea of the invisible hand.

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

profits

the opportunity cost of workers’ time

the wage and the average (physical) product of labor

the marginal (physical) product of labor and the output price

marginal utility and marginal cost

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

the marginal social cost is greater than the marginal social benefit.

the marginal social benefit is greater than the marginal social cost.

the marginal social cost is positive

the marginal external benefit is less than the marginal social cost.

companies that pollute are given a per-unit subsidy.

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

Free-rider problem

Economic rent

Private goods

Monopolies

Externalities

Your score is

See also:

Free AP Micro Practice Test 2026 Study Guide [PDF]