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AP Microeconomics Multiple Choice Questions

Free AP Microeconomics Tests

Home AP Practice Tests AP Microeconomics Practice Tests Part A: Multiple Choice

AP Micro Practice Tests

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Full-Length AP Micro Practice Exam

Part A: Multiple Choice

AP Microeconomics Multiple Choice Questions

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Question 1 of 60

1. Question

Scarcity exists because

resources can be reused.
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all goods have a price.
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some people are poor.
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resources are limited and wants are unlimited.
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government limits production.
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Question 2 of 60

2. Question

A production possibilities curve (PPC) that is bowed outward from the origin represents

constant opportunity costs.
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decreasing opportunity costs.
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inefficient production.
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economic growth.
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increasing opportunity costs.
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Question 3 of 60

3. Question

Suppose Country A can produce 10 cars or 40 computers with its resources, and Country B can produce 4 cars or 20 computers. Which statement is true?

Country A has a comparative advantage in cars.
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Country B has a comparative advantage in cars.
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Country A has a comparative advantage in both goods.
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Country B has a comparative advantage in both goods.
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Neither country benefits from trade.
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Question 4 of 60

4. Question

If the opportunity cost of producing 1 more unit of good X increases as more X is produced, the PPC will

be a straight line.
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be concave or bowed outward relative to the origin.
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be convex or bowed inward relative to the origin.
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shift inward.
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show constant costs.
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Question 5 of 60

5. Question

Which of the following would shift a production possibilities curve outward?

Unemployment decreases.
Correct Incorrect Correct answer

An increase in demand for one good.
Correct Incorrect Correct answer

Higher opportunity costs.
Correct Incorrect Correct answer

A decrease in working-age population.
Correct Incorrect Correct answer

A technological improvement in production.
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Question 6 of 60

6. Question

If a nation produces inside its production possibilities curve, it can increase production out to the production possibilities curve by

increasing productive efficiency.
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discovering new resources.
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reducing population.
Correct Incorrect Correct answer

raising prices.
Correct Incorrect Correct answer

increasing opportunity cost.
Correct Incorrect Correct answer

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Question 7 of 60

7. Question

If Country X specializes in good A and trades with Country Y for good B which specializes in its production, both countries can consume beyond their production possibilities curve because

trade eliminates opportunity costs.
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trade creates new resources.
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specialization and trade allow nations to consume beyond production possibilities.
Correct Incorrect Correct answer

prices fall to zero.
Correct Incorrect Correct answer

governments control production.
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Question 8 of 60

8. Question

According to the law of demand

as price increases, quantity demanded increases.
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as income increases, demand decreases.
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as price decreases, supply decreases.
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the demand curve shifts rightward.
Correct Incorrect Correct answer

as price increases, quantity demanded decreases.
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Question 9 of 60

9. Question

Which of the following will cause a rightward shift in the demand curve for airplane jet fuel assuming that it is a normal good?

An increase in the price of airplane jet fuel
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A decrease in consumer income
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A fall in the number of consumers
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A decrease in the price of airplane jets
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An increase in public long-distance transportation availability
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Question 10 of 60

10. Question

Which of the following will increase both equilibrium price and equilibrium quantity in a competitive market?

An increase in demand
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An increase in supply
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A decrease in supply
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A decrease in demand
Correct Incorrect Correct answer

A price ceiling
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Question 11 of 60

11. Question

Suppose the government sets a price ceiling below equilibrium. The likely result is

a surplus.
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a shortage.
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no change in the market.
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an outward shift in supply.
Correct Incorrect Correct answer

increased producer surplus.
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Question 12 of 60

12. Question

Which of the following pairs represents an example of complementary goods?

Coffee and tea
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Butter and margarine
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Jet fuel and airplane jets
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Chicken and beef
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Bicycles and automobiles
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Question 13 of 60

13. Question

The price elasticity of demand for a good is 0.7. If the firm raises price by 15%, total revenue will

increase.
Correct Incorrect Correct answer

decrease.
Correct Incorrect Correct answer

remain unchanged.
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fall to zero.
Correct Incorrect Correct answer

exactly double.
Correct Incorrect Correct answer

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Question 14 of 60

14. Question

If a 10% increase in price leads to a 20% decrease in quantity supplied, supply is

elastic.
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inelastic.
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unit elastic.
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perfectly elastic.
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perfectly inelastic.
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Question 15 of 60

15. Question

Producer surplus is defined as

total revenue minus total cost.
Correct Incorrect Correct answer

the area under the supply curve and above price.
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the area below the demand curve and above equilibrium price.
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the area above the supply curve and below price.
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total cost divided by output.
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Question 16 of 60

16. Question

A per-unit excise tax on a good will cause

the supply curve to shift left.
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the supply curve to shift right.
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the demand curve to shift right.
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an increase in equilibrium quantity.
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no change in market equilibrium.
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Question 17 of 60

17. Question

When the government imposes a per-unit excise tax on a good, the greater share of the tax burden falls on

the consumers if the demand for the good is more elastic than supply.
Correct Incorrect Correct answer

the producers if the supply of the good is more elastic than demand.
Correct Incorrect Correct answer

whichever side of the market—demand or supply—is relatively more elastic.
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foreign producers who export the good to the domestic market.
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the producers if the supply of the good is more inelastic than demand.
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Incorrect
Question 18 of 60

18. Question

If a per-unit subsidy is granted to producers, which of the following occurs?

Supply decreases and price rises.
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Supply increases and price falls.
Correct Incorrect Correct answer

Demand increases and quantity falls.
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There is a shortage.
Correct Incorrect Correct answer

Deadweight loss increases.
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Correct

Incorrect
Question 19 of 60

19. Question

If the government sets a price floor above equilibrium,

a surplus occurs.
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a shortage occurs.
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the market equilibrium is maintained.
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price falls to equilibrium.
Correct Incorrect Correct answer

efficiency increases.
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Correct

Incorrect
Question 20 of 60

20. Question

The area under the demand curve and above the market price represents

total cost.
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total revenue.
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deadweight loss.
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producer surplus.
Correct Incorrect Correct answer

consumer surplus.
Correct Incorrect Correct answer

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Incorrect
Question 21 of 60

21. Question

Suppose both the market demand and market supply for a good decrease simultaneously. Which of the following best describes the effect on the equilibrium quantity?

The equilibrium quantity increases.
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The equilibrium quantity decreases.
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The equilibrium quantity remains unchanged.
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The effect on equilibrium quantity is ambiguous.
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The equilibrium quantity doubles.
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Correct

Incorrect
Question 22 of 60

22. Question

According to the law of diminishing marginal returns as more units of a variable input are added to a fixed input,

total product must decline.
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average total cost decreases.
Correct Incorrect Correct answer

marginal cost must fall.
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marginal product eventually declines.
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fixed cost increases.
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Correct

Incorrect
Question 23 of 60

23. Question

In the short run, which of the following best describes a firm’s fixed costs?

Fixed costs are zero when output is zero.
Correct Incorrect Correct answer

Fixed costs increase as output increases.
Correct Incorrect Correct answer

Fixed costs vary with the level of production.
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Fixed costs remain constant regardless of the level of output.
Correct Incorrect Correct answer

Fixed costs are equal to marginal cost.
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Correct

Incorrect
Question 24 of 60

24. Question

Which of the following statements is true when a firm’s marginal cost (MC) is less than its average total cost (ATC)?

Average total cost is increasing.
Correct Incorrect Correct answer

Average total cost is decreasing.
Correct Incorrect Correct answer

Marginal cost is decreasing.
Correct Incorrect Correct answer

The firm is minimizing its total cost.
Correct Incorrect Correct answer

Average total cost remains constant.
Correct Incorrect Correct answer

Correct

Incorrect
Question 25 of 60

25. Question

In the short run, a firm’s shutdown point occurs at which of the following conditions?

Price is equal to average total cost
Correct Incorrect Correct answer

Price is equal to marginal cost
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Price is equal to marginal revenue
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Price is equal to average fixed cost
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Price is equal to average variable cost
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Correct

Incorrect
Question 26 of 60

26. Question

A perfectly competitive firm maximizes its profit at which of the following conditions?

Price equals average total cost
Correct Incorrect Correct answer

Price equals marginal cost
Correct Incorrect Correct answer

Average total cost equals average variable cost
Correct Incorrect Correct answer

Marginal revenue equals marginal cost
Correct Incorrect Correct answer

Total revenue equals total cost
Correct Incorrect Correct answer

Correct

Incorrect
Question 27 of 60

27. Question

If a firm is earning zero economic profit,

it should shut down immediately.
Correct Incorrect Correct answer

it is minimizing losses but not covering opportunity cost.
Correct Incorrect Correct answer

it is experiencing losses in the long run.
Correct Incorrect Correct answer

it has negative total revenue.
Correct Incorrect Correct answer

it is earning a normal profit.
Correct Incorrect Correct answer

Correct

Incorrect
Question 28 of 60

28. Question

In a perfectly competitive market, the firm’s demand curve is

downward sloping.
Correct Incorrect Correct answer

perfectly elastic.
Correct Incorrect Correct answer

perfectly inelastic.
Correct Incorrect Correct answer

identical to the market demand.
Correct Incorrect Correct answer

upward sloping.
Correct Incorrect Correct answer

Correct

Incorrect
Question 29 of 60

29. Question

Which of the following best explains why new firms enter a perfectly competitive market in the long run?

Existing firms are experiencing economic losses.
Correct Incorrect Correct answer

Barriers to entry prevent firms from entering the market.
Correct Incorrect Correct answer

The law of diminishing marginal returns applies.
Correct Incorrect Correct answer

Firms can engage in price discrimination.
Correct Incorrect Correct answer

Firms earn economic profits in the short run.
Correct Incorrect Correct answer

Correct

Incorrect
Question 30 of 60

30. Question

If new firms enter a perfectly competitive market, the market supply curve will

shift left and raise price.
Correct Incorrect Correct answer

shift right and lower price.
Correct Incorrect Correct answer

shift left and lower price.
Correct Incorrect Correct answer

remain unchanged.
Correct Incorrect Correct answer

become vertical.
Correct Incorrect Correct answer

Correct

Incorrect
Question 31 of 60

31. Question

In a perfectly competitive market, productive efficiency is achieved under which of the following conditions?

Price equals average variable cost
Correct Incorrect Correct answer

Price equals marginal cost
Correct Incorrect Correct answer

Price equals the minimum of average total cost
Correct Incorrect Correct answer

Marginal revenue equals marginal cost
Correct Incorrect Correct answer

Price exceeds marginal cost
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Correct

Incorrect
Question 32 of 60

32. Question

In a perfectly competitive market, allocative efficiency is achieved under which of the following conditions?

Price exceeds marginal cost
Correct Incorrect Correct answer

Price equals marginal cost
Correct Incorrect Correct answer

Price is less than marginal cost
Correct Incorrect Correct answer

Marginal revenue equals marginal cost
Correct Incorrect Correct answer

Marginal cost equals the minimum of average total cost
Correct Incorrect Correct answer

Correct

Incorrect
Question 33 of 60

33. Question

In the long-run equilibrium of a perfectly competitive market, firms produce at which of the following conditions?

Price equals marginal cost and average total cost, with ATC at its minimum
Correct Incorrect Correct answer

Price equals average variable cost and marginal cost
Correct Incorrect Correct answer

Marginal revenue equals average total cost, which exceeds marginal cost
Correct Incorrect Correct answer

Price exceeds average total cost
Correct Incorrect Correct answer

Price is less than marginal cost
Correct Incorrect Correct answer

Correct

Incorrect
Question 34 of 60

34. Question

The shape of the marginal cost curve is primarily due to

economies of scale.
Correct Incorrect Correct answer

increasing marginal returns.
Correct Incorrect Correct answer

fixed costs rising.
Correct Incorrect Correct answer

changes in average variable cost.
Correct Incorrect Correct answer

diminishing marginal returns.
Correct Incorrect Correct answer

Correct

Incorrect
Question 35 of 60

35. Question

A firm produces 50 units of output. Its total fixed cost is $100, and its total variable cost is $400. Based on this information, which of the following statements is correct?

The firm’s total cost per unit is $8, and its average fixed cost is $2.
Correct Incorrect Correct answer

The firm’s total cost per unit is $10, and its average variable cost is $8.
Correct Incorrect Correct answer

The firm’s total cost per unit is $10, and its average fixed cost is $4.
Correct Incorrect Correct answer

The firm’s total cost per unit is $12, and its average variable cost is $6.
Correct Incorrect Correct answer

The firm’s total cost per unit is $14, and its average variable cost is $10.
Correct Incorrect Correct answer

Correct

Incorrect
Question 36 of 60

36. Question

In a market where a single firm is the sole seller of a good, the firm faces the entire market demand curve and earns positive economic profits in the long run. Which of the following statements best explains why this market structure differs from perfect competition?

The firm can freely enter and exit the market, leading to zero long-run economic profit.
Correct Incorrect Correct answer

High barriers to entry prevent other firms from competing, allowing the firm to influence the market price.
Correct Incorrect Correct answer

Products are identical, and no single firm can affect the market price.
Correct Incorrect Correct answer

All firms have identical cost structures, which ensures that price equals marginal cost in the long run.
Correct Incorrect Correct answer

The firm must accept the market price, as determined by the intersection of market supply and demand.
Correct Incorrect Correct answer

Correct

Incorrect
Question 37 of 60

37. Question

A monopolist has the demand schedule below. If the monopolist lowers the price from $10 to $9, what is the marginal revenue from selling the second unit?

Price Quantity Demanded

$10 1

$9 2

$8 3

$1
Correct Incorrect Correct answer

$2
Correct Incorrect Correct answer

$7
Correct Incorrect Correct answer

$8
Correct Incorrect Correct answer

$9
Correct Incorrect Correct answer

Correct

Incorrect
Question 38 of 60

38. Question

The profit-maximizing output for a single-price monopolist occurs at the quantity where

price equals marginal revenue.
Correct Incorrect Correct answer

price equals marginal cost.
Correct Incorrect Correct answer

average total cost equals marginal cost.
Correct Incorrect Correct answer

marginal revenue equals average total cost.
Correct Incorrect Correct answer

marginal revenue equals marginal cost.
Correct Incorrect Correct answer

Correct

Incorrect
Question 39 of 60

39. Question

Compared to a perfectly competitive market, a single-price monopolist produces

more output and a lower price.
Correct Incorrect Correct answer

more output and a higher price.
Correct Incorrect Correct answer

the same output and price.
Correct Incorrect Correct answer

less output and a higher price.
Correct Incorrect Correct answer

zero output.
Correct Incorrect Correct answer

Correct

Incorrect
Question 40 of 60

40. Question

Which of the following best describes price discrimination?

Charging all customers the same price
Correct Incorrect Correct answer

Charging different prices based on cost differences
Correct Incorrect Correct answer

Charging different prices for the same product based on each customers’ willingness to pay
Correct Incorrect Correct answer

Charging prices below marginal cost
Correct Incorrect Correct answer

Offering quantity discounts only to other firms
Correct Incorrect Correct answer

Correct

Incorrect
Question 41 of 60

41. Question

A monopolist is able to perfectly price discriminate (first-degree price discrimination). Compared to a single-price monopolist, which of the following outcomes will occur?

Producer surplus will decrease, and deadweight loss will increase.
Correct Incorrect Correct answer

Consumer surplus will increase, and allocative efficiency will decline.
Correct Incorrect Correct answer

Both consumer and producer surplus will be eliminated.
Correct Incorrect Correct answer

Consumer surplus will be eliminated, and the deadweight loss will be eliminated.
Correct Incorrect Correct answer

Total surplus will decrease because prices are higher for all consumers.
Correct Incorrect Correct answer

Correct

Incorrect
Question 42 of 60

42. Question

The inefficiency of monopolistic competition in the long run results from

production at minimum of the average total cost.
Correct Incorrect Correct answer

allocative efficiency.
Correct Incorrect Correct answer

perfect substitutes among firms.
Correct Incorrect Correct answer

constant returns to scale.
Correct Incorrect Correct answer

excess capacity and markup pricing.
Correct Incorrect Correct answer

Correct

Incorrect
Question 43 of 60

43. Question

In the prisoners’ dilemma game, the Nash equilibrium occurs when

both players cooperate.
Correct Incorrect Correct answer

both players choose their dominant strategy.
Correct Incorrect Correct answer

both players earn maximum joint profit.
Correct Incorrect Correct answer

neither player has a dominant strategy.
Correct Incorrect Correct answer

one player always wins.
Correct Incorrect Correct answer

Correct

Incorrect
Question 44 of 60

44. Question

Collusion among firms is most likely when

there are many firms in the industry.
Correct Incorrect Correct answer

the market is perfectly competitive.
Correct Incorrect Correct answer

firms face elastic demand.
Correct Incorrect Correct answer

the government enforces antitrust laws.
Correct Incorrect Correct answer

products are identical, and entry is difficult.
Correct Incorrect Correct answer

Correct

Incorrect
Question 45 of 60

45. Question

A natural monopoly exists when

government regulations limit entry.
Correct Incorrect Correct answer

a single firm can produce at a lower cost than multiple firms.
Correct Incorrect Correct answer

economies of scale are exhausted quickly.
Correct Incorrect Correct answer

demand is perfectly inelastic.
Correct Incorrect Correct answer

price discrimination is impossible.
Correct Incorrect Correct answer

Correct

Incorrect
Question 46 of 60

46. Question

Compared to a single-price monopolist, a perfectly price-discriminating monopolist

reduces output.
Correct Incorrect Correct answer

increases deadweight loss.
Correct Incorrect Correct answer

produces the efficient output level.
Correct Incorrect Correct answer

decreases producer surplus.
Correct Incorrect Correct answer

charges the same price to all consumers.
Correct Incorrect Correct answer

Correct

Incorrect
Question 47 of 60

47. Question

In the long run, monopolistic competition leads to

zero economic profit and some inefficiency.
Correct Incorrect Correct answer

zero economic profit and perfect efficiency.
Correct Incorrect Correct answer

positive economic profit and efficiency.
Correct Incorrect Correct answer

negative profit and allocative efficiency.
Correct Incorrect Correct answer

full capacity utilization.
Correct Incorrect Correct answer

Correct

Incorrect
Question 48 of 60

48. Question

To maximize profit, a firm will continue to hire additional units of labor up to the point where

the wage rate equals the marginal product of labor.
Correct Incorrect Correct answer

the wage rate equals the average product of labor.
Correct Incorrect Correct answer

total revenue equals total cost.
Correct Incorrect Correct answer

the wage rate equals total labor cost.
Correct Incorrect Correct answer

the marginal revenue product of labor equals the marginal factor cost of labor.
Correct Incorrect Correct answer

Correct

Incorrect
Question 49 of 60

49. Question

The supply of labor is upward sloping because

higher wages increase the opportunity cost of leisure.
Correct Incorrect Correct answer

marginal product of labor diminishes.
Correct Incorrect Correct answer

firms hire fewer workers at higher wages.
Correct Incorrect Correct answer

labor is perfectly inelastic.
Correct Incorrect Correct answer

labor unions set all workers’ wages
Correct Incorrect Correct answer

Correct

Incorrect
Question 50 of 60

50. Question

A firm experiences diminishing marginal returns to labor. What happens to marginal revenue product as more labor is hired?

Marginal revenue product increases
Correct Incorrect Correct answer

Marginal revenue product decreases
Correct Incorrect Correct answer

Marginal revenue product stays constant
Correct Incorrect Correct answer

Marginal revenue product becomes negative
Correct Incorrect Correct answer

Marginal revenue product is unaffected
Correct Incorrect Correct answer

Correct

Incorrect
Question 51 of 60

51. Question

Which of the following will increase the equilibrium wage in a competitive labor market?

Increase in labor supply
Correct Incorrect Correct answer

Decrease in labor demand
Correct Incorrect Correct answer

Increase in demand for the good the labor produces
Correct Incorrect Correct answer

Government-imposed wage ceiling
Correct Incorrect Correct answer

Technological regression
Correct Incorrect Correct answer

Correct

Incorrect
Question 52 of 60

52. Question

The labor-leisure tradeoff implies that as wages rise, the substitution effect causes

more leisure to be consumed.
Correct Incorrect Correct answer

less leisure to be consumed.
Correct Incorrect Correct answer

labor supply to decrease.
Correct Incorrect Correct answer

labor supply to remain constant.
Correct Incorrect Correct answer

economic rent to increase.
Correct Incorrect Correct answer

Correct

Incorrect
Question 53 of 60

53. Question

If a firm can hire as many workers as desired at a fixed wage, the labor supply curve it faces is

perfectly inelastic.
Correct Incorrect Correct answer

perfectly elastic.
Correct Incorrect Correct answer

upward sloping.
Correct Incorrect Correct answer

downward sloping.
Correct Incorrect Correct answer

backward-bending.
Correct Incorrect Correct answer

Correct

Incorrect
Question 54 of 60

54. Question

A firm is producing output using labor (L) and capital (K). To minimize the cost of producing a given level of output, the firm will hire labor and capital such that

the marginal product of labor equals the marginal product of capital.
Correct Incorrect Correct answer

the marginal revenue product of labor equals the marginal product of capital.
Correct Incorrect Correct answer

the ratio of the marginal product of labor to the wage equals the ratio of the marginal product of capital to the rental rate of capital.
Correct Incorrect Correct answer

the marginal product of labor divided by the wage equals the marginal product of labor divided by the price of the output.
Correct Incorrect Correct answer

the total cost of labor equals the total cost of capital.
Correct Incorrect Correct answer

Correct

Incorrect
Question 55 of 60

55. Question

A single firm is the only employer of nurses in a small town. The labor supply curve facing the firm is upward sloping, and the firm’s marginal factor cost lies above the supply curve. The firm seeks to maximize profit. Which of the following statements correctly describes the firm’s behavior?

The firm will hire workers until the wage equals the value of the marginal product of labor.
Correct Incorrect Correct answer

The firm will hire fewer workers and pay a lower wage than would occur in a perfectly competitive labor market.
Correct Incorrect Correct answer

The firm will hire more workers and pay a higher wage than would occur in a perfectly competitive labor market.
Correct Incorrect Correct answer

The firm will always pay a wage equal to the marginal cost of labor.
Correct Incorrect Correct answer

Correct

Incorrect
Question 56 of 60

56. Question

Government can correct a negative externality through

per-unit subsidies to consumers
Correct Incorrect Correct answer

price floors
Correct Incorrect Correct answer

lump sum subsidies
Correct Incorrect Correct answer

providing public goods
Correct Incorrect Correct answer

per-unit taxes on producers
Correct Incorrect Correct answer

Correct

Incorrect
Question 57 of 60

57. Question

Government intervention in a market with a positive externality often involves

imposing per-unit taxes
Correct Incorrect Correct answer

reducing demand
Correct Incorrect Correct answer

issuing lump-sum subsidies
Correct Incorrect Correct answer

providing per-unit subsidies
Correct Incorrect Correct answer

imposing lump-sum taxes
Correct Incorrect Correct answer

Correct

Incorrect
Question 58 of 60

58. Question

Common resources are prone to overuse because

they are excludable
Correct Incorrect Correct answer

they are nonrival
Correct Incorrect Correct answer

they are nonexcludable and rival
Correct Incorrect Correct answer

government sets prices too low
Correct Incorrect Correct answer

markets efficiently allocate them
Correct Incorrect Correct answer

Correct

Incorrect
Question 59 of 60

59. Question

Government provision of national defense is an example of

a common resource
Correct Incorrect Correct answer

a positive externality
Correct Incorrect Correct answer

a negative externality
Correct Incorrect Correct answer

a public good
Correct Incorrect Correct answer

a private good
Correct Incorrect Correct answer

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Question 60 of 60

60. Question

Which of the following best explains why income inequality persists across and within countries?

Factor markets always allocate resources efficiently, leading to identical income levels across individuals.
Correct Incorrect Correct answer

The Lorenz curve directly determines the level of income earned by each household in an economy.
Correct Incorrect Correct answer

Regressive tax structures always eliminate disparities in income and wealth.
Correct Incorrect Correct answer

The Gini coefficient determines individual incomes
Correct Incorrect Correct answer

Differences in human capital, access to financial markets, and bargaining power cause variations in the value of individuals’ marginal products.
Correct Incorrect Correct answer

Correct

Incorrect

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