AP MICECONOMICS 2023
SECTION I
1. Scarcity leads to which of the following?
(A) Unemployed resources
(B) Absolute advantage
(C) Opportunity cost
(D) Efficiency
(E) Monopolies
2. Which of the following is true in a command economy?
(A) There is more private ownership of the factors of production than in a market economy.
(B) Production decisions are based on the incentive of firms to maximize profits.
(C) The government directs the use of factors of production.
(D) The price system is used to allocate resources.
(E) There is more freedom of enterprise than in a market economy.
3. The graph provided shows the production possibilities curve for a country's economy, economy
is currently producing at point Z. What is the opportunity cost of changing production to point
M?
(A) 3 units of Good Y
(B) 8 units of Good Y
(C) 3 unuts of Good X
(D) 4 units of Good X
(E) 2 units of Good X
4. The market for Good Z has relatively elastic supply and demand curves. Market efficiency is
obtained when
(A) total labor cost is minimized for each firm
(B) each firm experiences economies of scale
(C) consumer surplus is greater than producer surplus
(D) producer surplus is zero
(E) deadweight loss is zero
5. Which of the following statements about short run costs is always true as a firm increases its
production?
(A) Average fixed cost decreases.
(B) Average variable cost decreases.
(C) Average total cost decreases.
(D) Marginal cost is lower than the average variable cost.
(E) Marginal cost is lower than the average total cost.
6. A natural monopoly exists when a single firm
(A) produces a quantity of output that maximizes the total producer surplus
(B) produces the allocatively efficient quantity of output of a good
(C) has an upward-sloping marginal cost curve
(D) has a downward-sloping average total cost curve over the relevant range of output
(E) sets price equal to marginal cost in order to maximize profit
7. Which of the following ignores implicit cost?
(A) Normal profit
(B) Accounting profit
(C) Economic profit
(D) Opportunity cost
(E) Economic cost
8. Apple trees need bees to pollinate their flowers and produce apples. Apple farmers hire
beekeepers to bring bees to their orchards to pollinate the flowers. This is an example of a
(A) negative externality
(B) tragedy of the commons
(C) public good
(D) market transaction
(E) free-rider problem
9. A decrease in the cost of land devoted for building townhouses will most likely cause which of
the following?
(A) The supply curve of townhouses will shift to the left.
(B) The demand curve for townhouses will become more elastic.
(C) The price of townhouses will increase.
(D) The supply of townhouses will increase.
(E) There will be less incentive to build townhouses.
10. Which of the following is true at the quantity of labor hired by a profit maximizing
monopsonist?
(A) Marginal revenue product is less than marginal factor cost.
(B) Marginal revenue product is greater than marginal factor cost.
(C) Marginal revenue product is less than the market wage.
(D) Marginal revenue product is greater than the market wage
(E) Marginal revenue product equals the market wage.
11. Consumer surplus could be the shaded area in which of the following situations?
(A) A price floor set at P1 in the market
(B) A price floor set at P2 in the market
(C) A price ceiling set at P1 in the market
(D) A per-unit subsidy equal to P2- P1 granted to producers
(E) A per-unit tax equal to P2-P1 imposed on producers
12. A decrease in the demand for antique lanterns, normal good, would be caused by which of
the following?
(A) An increase in consumers’ incomes
(B) An increase in the price of antique lanterns
(C) An increase in the expected price of antique lanterns in the future
(D) An increase in the price of electric lanterns, a substitute good
(E) An increase in the price of lamp oil, a complementary good
Orange juice (in Liters) Canvases
Stefan 40 30
Donna 20 10
13. Stefan and Donna produce orange juice and canvases. The table provided shows the
maximum possible production of orange juice OR canvases that can be produced by Stefan and
Donna. Which of the following terms of trade would be mutually beneficial to Stefan and Donna?
(A) 1 canvas for 0.4 liter of orange juice
(B) 1 canvas for 0.5 liter of orange juice
(C) 1 canvas for 1 liter of orange juice
(D) 1 canvas for 1.5 liters of orange juice
(E) 1 canvas for 2.5 liters of orange juice
Apples Bananas
Marginal utility of last unit 15 12
Price of unit $5 $3
14. The table provided shows Ricardo's marginal utility of the last unit consumed of apples and
bananas and the price of each good. Ricardo has $125 to spend on apples and bananas. He
currently buys 10 apples and 25 bananas. Assuming that he remains within his budget constraint,
Ricardo should do which of the following to increase his utility?
(A) Buy more of both goods
(B) Buy fewer of both goods
(C) Buy more bananas and fewer apples
(D) Buy more apples and fewer bananas
(E) Contiune buying the same quantities of both goods
15. Toby’s Toy Trans produces train sets in a monopolistically competitive market. If Toby
increases the price of a train set by 5 percent causing 10 percent decrease in the quantity
demanded of train sets, which of the following will occur?
(A) Toby's total revenue will increase.
(B) Toby's total revenue will decrease.
(C) Toby's total revenue will remain the same.
(D) The demand for Toby's train sets will increase.
(E) The demand for Toby's train sets will decrease.
Number of Cases Total Cost($)
0 15
1 25
2 45
3 75
4 115
5 165
16. The table provided shows the daily total cost data for Hansel's Hot Sauce. If the average fixed
cost was $5 per case, how many cases of hot sauce had Hansel's Hot Sauce produced?
(A) 1
(B) 2
(C) 3
(D) 4
(E) 5
17. Which of the following situations best fits with the description of a firm in a
perfectly competitive market?
(A) GaryNote constantly offers discounts to steal customers from EricNote, which retaliates by
oftening price cuts.
(B) GaryNote has many competitors in the market, and each firm differentiates its product to gain
customer loyalty.
(C) GaryNote can hire as many workers as it wants at the market wage, but it must decrease its
price to sell more output.
(D) GaryNote sets its own price for its output, but because of market competition it earns zero
economic profit in the long run.
(E) GaryNote can sell as many units of output as it wants at the market price but will lose all its
customers if it charges a higher price.
18. Which of the following will happen if the firm continues to hire additional units of labor
beyond L2 in the short run?
(A) The firm's marginal cost will decrease.
(B) The film will begin expenencing diminishing marginal returns.
(C) The firm's fixed cost will increase
(D) The average product of labor will be equal to zero.
(E) The total product of labor will decrease.
19. A player's dominant strategy is
(A) independent of the other player's choice
(B) dependent on the other player's choice
(C) the strategy that results in the maximum combined payoff for both players
(D) the strategy that always delivers the other player's best outcome of the game
(E) the strategy that always delivers the other player's worst outcome of the game
20. Apples are produced in a perfectly competitive market with no government intervention.
Which of the following price changes will cause the total economic surplus to increase for the
apple market depicted in the graph provided?
(A) A decrease in price from $8 to $6
(B) A decrease in price from $6 to $4
(C) A decrease in price from $6 to $0
(D) A increase in price from $6 to $08
(E) A increase in price from $8 to $12
21. Daily Tools is a typical firm in a monopolistically competitive market that produces kits for
everyday use. Which of the following explain why Daily Tools is inefficient in long run
equilibrium?
(A) The entry of more efficient firms is blocked.
(B) The firm produces the quantity at which marginal cost equals average total cost.
(C) The firm does not produce the quantity that results in minimum average total cost
(D) The firm does not produce the quantity that minimizes total cost
(E) The firm's customers value the last unit of output is less than its cost.
22. Cross- price elasticity of demand for honey with respective to yogurt is 4. At the current
equilibrium, consumers are buying 100 containers of yogurt per week and 20 containers of
honey per week. If the price of yogurt increases by 10 percent per container, what will be the
change in new quantity demanded of honey?
(A) 4 containers
(B) 8 containers
(C) 10 containers
(D) 12 containers
(E) 40 containers
23. OfficeClips is a typical firm that produces and sells paper clips in a perfectly competitive
market. OfficeClips is currently earning a positive economic profit. In the long run, what will
happen to the firm's economic profit, the market price, and the market quantity?
Firm's Profit Market Price Market Quantity
(A) No change Decrease Increase
(B) No change Increase Decrease
(C) Decrease Increase Decrease
(D) Decrease Decrease Decrease
(E) Decrease Decrease Increase
24. The allocatively efficient level of output is produced in any market structure when
(A) firms are experiencing economics of scale
(B) marginal revenue is equal to zero
(C) long-run economic profit is equal to zero
(D) price is equal to marginal cost
(E) average variable cost is at a minimum
25. FormalWear is a clothing factory that hires workers as a variable input and rents seaming
machines as a fixed input. Which of the following will happen when the marginal product of
workers decreases?
(A) Total variable cost will decrease
(B) Total fixed cost will increase.
(C) Short-run average total cost will decrease.
(D) Marginal cost will increase.
(E) Marginal cost will equal average total cost.
Quantity Price（$） Total Cost（$）
1 10 11
2 8 14
3 7 18
4 5 25
5 3 34
31.The table provided shows price and cost data for Howell's Toy Hoops, a typical profit-
maximizing firm that sells its toys in a monopolistically competitive market. At the profit
maximizing quantity, the economic profit for Howell's Toy Hoops is
(A) -$19
(B) -$5
(C) -$1
(D) $2
(E) $3
32 Which of the following best represents the most distinctive characteristic of an oligopoly?
(A)A market with a single firm that faces nocompetition.
(B)A market where a few firms have significant market share.
(C)A market with low barriers to entry.
(D)A market with many firms selling differentiated products.
(E)A market with many firms earning zero economic profits in the long run.
33. Dylan recently quit his job as a journalist for a local newspaper where he was making $80,000
per year. He opened an ice cream shop where he earns a yearly total revenue of $250,000 He
spends $150,000 each year on rent, resources, and workers be hires. Which of the following
equals Dylan's accounting profit and economic profit from the ice-cream shop?
Accounting Profit Economic Profit
(A) $250,000 $20,000
(B) $230,000 $100,000
(C) $150,000 $70,000
(D) $100,000 $80,000
(E) $100.000 $20,000
37. Which of the following combinations is most likely to result in the demand for a product
being highly price inelastic?
(A) The product has few close substitutes and represents a small percentage of a consumer's
income.
(B) The product has few close substitutes and represents a large percentage of a consumer's
income.
(C) The product has many close substitutes and represents a small percentage of a consumer's
income.
(D) The product has many close substitutes and represents a moderate percentage of a
consumer's income.
(E) The product has many close substitutes and represents a large percentage of a consumer's
income.
Number of Workers Quantity of T-Shirt
0 0
1 24
2 44
3 60
4 72
5 80
38. The table provided shows the daily output for a profit-maximizing T-shirt firm that is
operating in a perfectly competitive product market and hires labor from a perfectly competitive
labor market. If each T-shirt sells for $10 and the equilibrium daily wage is $100, how many
workers will the firm hire to maximize profit?
(A) 1
(B) 2
(C) 3
(D) 4
(E) 5
39. A firm with market power sells its product in two markets. The firm faces the same cost
curves in both markets but faces a relatively elastic demand in one market for its product and a
relatively inelastic demand in the other market for that same product. Which of the following will
increase the firm's profits?
(A) The firm changes a lower price in both markets.
(B)The firm charges a higher price in both markets.
(C) The firm charges a price equal to its marginal cost in both markets.
(D) The firm charges a lower price in the market with elastic demand and a higher price in the
market with inelastic demand.
(E) The firm charges a lower price in the market with inelastic demand and a higher price in the
market with elastic demand.
40. Which of the following reasons could explain why a firm might hire fewer workers?
(A)A decrease in the wage rate
(B) A decrease in labor productivity
(C) An increase in the price of a substitude input
(D) An increase in the price of the firm's product
(E) An increase in demand for the firms's product
41. Which of the following is an example of a good that is nonexcludable and rival in
consumption?
(A) Fish sandwich
(B) Public highway
(C) Private dance lesson
(D) Online music
(E) National defense
42. The government of Annapolits has determined that the country's power company, an
unregulated natural monopolist, should be required to produce the allocatively efficient quantity
of electricity. Which of the following actions will achieve the government's goal?
(A) The government imposes a per-unit tax on each unit of output the monopoly produces and
imposes a lump-sum tax on the monopolist to eliminate any remaining profit.
(B) The government sets the price at the point where demand and average total cost curves
intesrect and provides a lump-sum subsidy to the monopolist equal to the monopolist's normal
profit.
(C) The government sets the price at the point where demand and average total cost curves
intersrect and imposes a lump-sum tax on the monopolist to eliminate the monopolist's normal
profit.
(D) The government sets the price at the point where demand and marginal cost curves intersect
and imposes a lump-sum tax on the monopolist to eliminate the monopolist's normal profit.
(E) The government sets the price at the point where demand and marginal curves intersect and
provides a lump-sum subsidy to the monopolist to earn normal profit.
50. The graph provided shows the marginal revenue (MR), average variable cost(AVC),
average total cost (ATC), and marginal cost (MC) curves for a perfectly competitive firm. Which of
the following is true if the firm is currently producing Q"units of output?
(A) The firm can increase its economic profit by producing fewer units of output.
(B) The firm can increase its economic profit by increasing the price of its product.
(C) The firm is maximizing its economic profit at the current level of output.
(D) The firm can increase total revenue by producing fewer units of output.
(E) The firm can increase total revenue by decreasing the price of its product.
51. Home remodeling services are provided in a perfectly competitive market but generate noise
that angers neighbors. What is the socially optimal quantity of home remodeling services and the
area that represents deadweight loss associated with the market equilibrium?
(A)Q1 and area ACD
(B)Q1 and area ABC
(C)Q2 and area ABC
(S)Q2 and area ACD
(E)Q3 and area CEF
52. Which of the following is an example of physical capital?
(A) Encourage from a job
(B) Fish in the ocean
(C) Money in a person's wallet
(D) An unskilled worker
(E) A tractor used in farming
53. Donuts for Dollars is a typical profit maximizing firm in a perfectly competitive market that is
earning positive economic profit in the short run. Which of the following statements must be
true?
(A) Price must be less than average total cost in the short run, and firms will exit the market in
the long run.
(B) Price must be less than average total cost in the short run, and firms will earn normal profit in
the long run.
(C) Price must equal average total cost in the short run, and firms will enter the marks in the long
run.
(D) Price must be greater than average toal cost in the short run, and firms will exit the market in
the long run.
(E) Price must be greater than average total cost in the short run, and firms will earn normal
profit in the long run.
CCEEA
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CEDCB
CEEA-(ignore Q.20)
CBEDD
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