AP Microeconomics Unit 3 Practice Test 2026 Questions Answers

Last Updated on June 30, 2026

AP Microeconomics Unit 3 Practice Test 2026 Questions and Answers. In this chapter (Production, Cost, and the Perfect Competition Model), we now turn to the behavior and costs of firms (businesses) in production.

The costs involved in production and how firms maximize profit are the key issues addressed. Sometimes students get overwhelmed with this information, with lots of curves and formulas to remember. However, with practice and review, you will be able to master the key concepts.

Concerning a firm’s production, the distinction between the short and the long run is very significant. The difference between the short run and the long run in this context is not the same as the difference between a 100-meter race and a marathon.

AP Microeconomics Unit 3 Practice Test

AP Microeconomics Practice Test
Unit 3: Production, Cost, and the Perfect Competition Model
Total Items: MCQ 24
Time Limit: N/A

1) The individual firm, operating under perfect competition, is characterized as:

a price maker.

one of a few sellers.

a price strategist.

a price taker.

interdependent.

2) The vertical distance between the AVC and ATC measures

marginal cost.

total variable costs.

revenue

total fixed cost.

average fixed costs.

3) Which of the following is not correct for a perfectly competitive firm, in the long-run equilibrium?

Price = minimum average total cost.

Price = marginal revenue

Price = minimum average variable cost.

Price = marginal cost.

Normal profits.

4) In the short run, a firm should shut down if

price > ATC.

price < AVC.

price < ATC.

price = ATC.

MR = MC.

5) A profit-maximizing, perfectly competitive firm is producing where marginal revenue is greater than the marginal cost. What actions should this firm take?

Increase the quantity they are producing

Decrease the quantity they are producing

Increase their marginal cost

Leave the industry

Increase production so that MC > MR

The table refers to the quantity of hamburgers that can be produced in a day. What is the marginal product of the 4th worker?

210

7) Which of the following statements is true regarding the marginal cost (MC), average variable cost (AVC), and average total cost (ATC) curves?

if MC is greater than ATC and AVC, then ATC and AVC must be decreasing

if MC is greater than ATC and AVC, then ATC and AVC must be increasing.

If MC is increasing, then ATC and AVC must be increasing.

If ATC and AVC are decreasing, MC must be decreasing as well.

If AVC is increasing, then both MC and ATC must be increasing.

8) All of the following are true about a perfectly competitive firm in long-run equilibrium except

economic profit = zero.

P > ATC

P = minimum ATC

P > AVC

P = MC

9) With capital fixed at one unit with 1, 2, 3 units of labor added in equal successive units, production of the output increases from 300 (1 unit of labor) to 350 (2 units of labor) to 375 (3 units of labor). Which of the following is a correct interpretation?

This is long-run increasing returns to scale.

This is long-run decreasing returns to scale.

This is long-run constant returns to scale.

This is short-run diminishing marginal returns.

This is short-run increasing marginal returns.

10) If a per-unit tax is imposed on the production of wheat, which of the following shifts of cost curves is correct?

There will be a downward shift of the ATC curve only, not the MC and AVC curves.

There will be an upward shift of the ATC curve only, not MC and AVC.

There will be an upward shift of the MC curve only, not ATC and AVC.

There will be a upward shift of the MC, ATC, and AVC curves.

There will be an increase in the AFC curve.

11)

The table refers to the number quantity of hamburgers that can be produced in a day. With which worker will diminishing returns set in?

2nd

3rd

4th

5th

6th

12)

Which cost curves do A, B, C, and D represent, in order from A to D

ATC, MC, AFC, AVC

MC, AFC, AVC, ATC

MC, ATC, AVC, AFC

AFC, MC, ATC, AVC

AFC, ATC, AVC, MC

13) Marginal cost (MC) is equal to average variable cost (AVC) and average total cost (ATC) when

marginal cost (MC) intersects AVC and ATC at their maximum points

AVC and ATC intersect MC at its maximum point.

MC intersects AVC and ATC at their minimum points.

AVC and ATC intersect MC at its minimum point.

the economy is in the recovery phase of the business cycle.

14) .

In the table, what is the total variable cost of producing the 4th unit of output?

$12.5

$20

$30

$162

$182

15) There are economies of scale when

the tripling of all inputs doubles the output produced.

long-run average total cost decreases as output increases.

the short-run average total cost curve remains constant as output increases.

the long-run average total cost curve increases as output increases

the short-run average total cost curve increases as output increases

16)

In the table, what is the marginal cost of producing the 4th unit of output?

$12.5

$36.4

$50

17) If a firm’s average total cost curve is increasing as output increases, the firm’s marginal cost must be

less than average total cost.

greater than average total cost.

equal to average total cost.

less than average variable cost but greater than average total cost.

less than both variable and average total cost.

18) The demand curve for the firm operating under perfect competition is

upward sloping to the right.

downward sloping to the right.

a perfectly vertical line.

a perfectly horizontal line.

concave to origin.

19) Firms maximize their profits by producing a level of output at which

MC = AFC.

MC = MR.

P = ATC.

MR = AVC.

P = AVC.

20) If a business owner has a $100,000 accounting profit and could have made exactly $60,000 in his next best business opportunity, he has earned

$160,000 in economic profits.

$100,000 in economic profits.

$40,000 in economic profits.

neither an economic profit or loss.

none of the above.

21)

In the table, what is the average variable cost of producing 3 units of output?

$14.6

$16.6

$33

$44

22) Which of the following is true?

TC = TVC + TFC

TFC = MC + ATC

AVC + AFC = TC

MC = TC − TFC

ATC = AVC + MC

23) Which of the following is true about this profit-maximizing, perfectly competitive firm?

The firm should shut down as P < AVC.

The firm is covering AVC but not ATC.

The firm is incurring economic losses, and firms will enter the industry in the long run.

The firm is incurring economic losses, and firms will leave the industry in the long run

The firm is earning economic profits, and firms will enter the industry in the long run.

24) Assume the market for grapes is perfectly competitive. Now assume there is an increase in demand for grapes in the global market. How will this affect a firm currently producing grapes in the short run?

Economic profits will decrease due to increased production costs.

Average total costs will decrease.

The firm’s demand curves will shift up, leading to economic profits.

The firm’s demand curves will shift down, leading to economic losses

The firm’s demand curve will shift up, but the firm will not make economic profits.

Your score is

See also:

Free AP Micro Practice Test 2026 Study Guide [PDF]