Transcript APECON - Unit 4 - Review Questions - pm

AP Microeconomics
Mr. Meier
Penn Manor HS
Unit 1 (~3 questions)
Unit 2 (~3-4 questions)
Unit 3 (~12-14 questions)
Unit 4 (~20-24 questions)
 Which
of the following is true?
A. TC = (AVC + AFC) * Q
B. TFC = TC at all levels of output
C. AVC + AFC = TC
D. MC = TC – TFC
E. ATC = AVC + MC
A
firm’s short run supply curve is equivalent
to its _________________ above
_________________.

Implicit costs of a “Mom & Pop” owned
business include
A. Their accounting profits
B. Their to accounting costs
C. The earnings that could have been earned by
using resources elsewhere
D. The revenue their business earned this year
E. The Average Revenue of other Mom & Pop
businesses

Which of the following is NOT correct about
economies of scale?
A. They are associated with increases in output
B. They are associated with the increasing portion of
the LR ATC curve
C. They are associated with the decreasing portion of
the LR ATC curve
D. They demonstrate decreases in per unit average
total costs as plant size increase
E. They may be caused by increased specialization
and technology

Marginal Cost (MC) is equal to average
variable cost (AVC) and Average Total Cost
(ATC) when:
A. MC intersects AVC and ATC at their maximum
B.
C.
D.
E.
points
AVC and ATC intersect MC at its maximum point
AVC and ATC intersect MC at its minimum point
MC intersects AVC and ATC at their minimum
points
The economy is in the recovery phase of the
business cycle
 In
the long run, a perfectly competitive firm
without government intervention will
ALWAYS achieve:
A. Productive Efficiency?
B. Allocative Efficiency?
(Yes or no – for each)

For which of the following market structures
are the most substitutes available to
consumers?
A. Perfect Competition
B. Monopolistic Competition
C. Oligopoly
D. Monopoly
E. All of the above

Which of the following market structures
has the greatest degree of elasticity?
A. Perfect Competition
B. Monopolistic Competition
C. Oligopoly
D. Monopoly
E. All of the above
 At
what P will this
firm earn a
normal profit?
 Below what P will
this firm shut
down in the short
run?
 Above what P will
this firm earn
economic profit?
 At
what P will this
firm earn an
economic profit?
 In the long run,
what will be this
firm’s output level?
 A firm never
choose to produce
at price P
BECAUSE…
 Is
this graph showing a firm in SR or LR ?
 In the LR, how will the following change?
A. On Market Graph: Demand, Supply, Price
B. On Firm Graph: ATC, MR, Output level
 Which
of the following market structures has
the largest number of sellers?
A. Perfect Competition
B. Monopolistic Competition
C. Oligopoly
D. Monopoly
E. All of the above

Which of the following market structures is
NOT a price maker?
A. Perfect Competition
B. Monopolistic Competition
C. Oligopoly
D. Monopoly
E. All of the above
 Firms
maximize their profits by producing a
level of output at which
A. MC = AFC
B. MC = MR
C. P = ATC
D. MR = AVC
E. P = AVC
 All
Firms
by producing where:
A. MC = AFC
C. P = ATC
D. MR = AVC
E. P = AVC
 In
the short run, the shutdown point is equal
to
A. Minimum point on the ATC curve
B. Maximum point on the ATC curve
C. Minimum point on the AVC curve
D. Maximum point on the AVC curve
E. Minimum point on the MC curve
 The
demand curve for a typical firm
operating under perfect competition is
A. Upward sloping
B. Downward sloping
C. Perfectly vertical
D. Perfectly horizontal
E. Concave to the origin
 Which
of the following is NOT typically true
for the perfectly competitive firm in the long
run?
A. P = Minimum ATC
B. P = Marginal Revenue
C. P = Minimum AVC
D. P = Marginal Cost
E. The firm earns a normal profit
 Consumer
surplus is
A. The price of a good divided by its marginal utility
B. The marginal utility of a good divided by its price
C. The total utility of the good
D. The difference between what the good is worth to
the consumer and its market price
E. Consumers’ annual savings
 Given
this $2 per
unit tax, calculate
the following:
(a) PS before the tax
(b) PS after the tax
(c) DWL
(d) Total Gov’t
Revenue
 The
utility maximizing rule is to choose the
combination of goods that …
A. Has the highest marginal utility of each good in the
B.
C.
D.
E.
basket.
Has the lowest prices for the goods
Has the greatest difference between marginal
utility and price
The marginal utility over price for each good is
equal.
The marginal utility over price for each good is
equal, within the budget constraint.
 Copy
this graph, and
label the following
with the given letter
A. Constant Returns to
Scale
B. Diseconomies of Scale
C. Economies of Scale
 Give
one possible cause your firm could
experience:
A. Economies of Scale
B. Diseconomies of Scale
 According
to the principle of diminishing
marginal utility, as you increase the quantity
consumed…
A. Marginal utility stays the same
B. Total utility stays the same
C. Marginal utility decreases
D. Marginal utility and total utility both decrease
E. Total utility declines
 At
any given output level, on a firm graph,
the vertical difference between ATC and
AVC is equal to what?
 If
a firm is earning an accounting profit, what
do you know must be true about the firm’s
economic profit?
 Draw
a side-by-side graph for perfectly
competitive Industry/Firm earning short run
profits.
A. What two points are used to define the right edge
of the PROFIT box?
 Draw
a side-by-side graph for perfectly
competitive Industry/Firm earning a short
run loss.
A. What two points are used to define the right edge
of the LOSS box?
 In
the short run, a perfectly competitive firm
without government intervention will
ALWAYS achieve:
A. Productive Efficiency?
B. Allocative Efficiency?
Yes or no.
 If
tacos cost $2 each,
Identify the following:
 MU
for the 4th taco
 MU/P for the 3rd taco
 How many tacos will
this consumer choose
to purchase?
 Why
must the Marginal Cost curve ALWAYS
intersect ATC and AVC at their minimums?
 If
you open a McDonald’s Franchise, list (a)
two expenses that would be considered
EXPLICIT costs, and two expenses that
would be considered IMPLICIT costs.
 If
the government imposes a tax on the
production of pencils, what will happen to
each of the following?
(increase or decrease)
A.
B.
C.
D.
Price sellers receive
Quantity of pencils sold
Consumer surplus
DeadWeightLoss (DWL)
 If
the government imposes a subsidy on
milk, what will happen to each of the
following?
(increase or decrease)
A.
B.
C.
D.
Price paid by the buyers
Quantity of milk produced
Producer Surplus
DeadWeightLoss (DWL)
 How
are costs different in the LONG RUN
different than the SHORT RUN?
 Which
is more likely to promote future
economic growth?
A. Investment in more capital goods
B. Investment in more consumer goods
WHY?
 If
the price of frosted flakes increases from
$4 to $5 per box, and as a result the quantity
demanded of a DIFFERENT good
(X)increases from 20 million to 30 million …
A. Calculate the cross elasticity of demand for good X
with respect to Frosted Flakes.
B. What does this tell you about how these goods are
related?
 WHY
is it impossible for a perfectly
competitive firm to earn a profit or loss in
the long run?
 Yes, they
are a price taker, and Mr. Meier
says so… but what actually CHANGES in the
LR to eliminate SR profits or losses??