AP MICRO Week 3 Practice Quiz: G J, 9 17

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1 1 1. If the cost of producing automobiles increases, the price, equilibrium quantity and consumer surplus will most likely change in which of the following ways? Price Quantity Consumer Surplus (A) Increase Increase Increase (B) Increase Increase Decrease (C) Increase Decrease Decrease (D) Decrease Increase Decrease (E) Decrease Decrease Decrease 2. Producer surplus is the (A) area under the supply curve to the left of the amount sold. (B) area under the supply curve to the right of the amount sold. (C) amount the is seller paid plus the cost of production. (D) amount the is seller paid less the cost of production. (E) cost to sellers of participating in a market. 3. Which of the following will occur if a legal price floor is placed on a good below its free-market equilibrium? (A) Surpluses will develop. (B) Shortages will develop. (C) Underground markets will develop. (D) The equilibrium price will ration the good. (E) The quantity sold will increase. 4. According to the graph above, which of the following will occur if a legal price ceiling is imposed at price X? (A) Shortages will occur. (B) Surpluses will occur. (C) Demand will increase. (D) Q1 will be purchased. (E) Supply will decrease. 5. Which of the following statements about price controls is true? (A) A price ceiling causes a shortage if the ceiling price is above the equilibrium price. (B) A price floor causes a surplus if the price floor is below the equilibrium price. (C) A price ceiling causes an increase in demand if the ceiling price is set below the equilibrium price. (D) A price ceiling causes a decrease in demand if the price floor is set above the equilibrium price. (E) Price ceilings and price floors result in a misallocation of resources.

2 2 6. If both supply and demand for a good increase, which of the following is true? (A) Price will increase (B) Price will decrease (C) Quantity will increase (D) Quantity will decrease (E) Quantity may increase, decrease, or remain the same Questions 10 and 11 refer to the graph below. The market is currently in equilibrium. 7. Which of the following is true of an effective price ceiling? (A) It is put in place to help producers (B) It must be set below equilibrium (C) It will increase the quantity of the good sold in the market (D) It will create a surplus in the market (E) It will not change the quantity of the good demanded or supplied 8. A decrease in the supply of a good will have what effect on consumer surplus, producer surplus, and total surplus in the market? Consumer Producer Total Surplus Surplus Surplus (A) Increase Increase Increase (B) Increase Decrease Decrease (C) Decrease Decrease Decrease (D) Decrease Decrease Increase (E) Decrease Increase Decrease 9. Producer surplus will increase as a result of which of the following? (A) a decrease in price (B) an increase in demand (C) a decrease in demand (D) a movement toward competition in the market (E) an increase in input costs 10. In a competitive equilibrium, what is the value of consumer surplus? (A) $200 (B) $180 (C) $160 (D) $80 (E) $ If a price floor is set at $6, price and quantity demanded will equal which of the following? (A) $6, 30 (B) $10, 30 (C) $10, 20 (D) $6, 10 (E) $6, If the government sets a price ceiling below equilibrium price in a market, which of the following would occur? (A) A shortage would occur (B) A surplus would occur (C) The market would not be affected (D) Prices would rise (E) The quantity sold would increase

3 3 13. Which of the following is true of a price floor? (A) The intention of the government in creating the price floor is to assist the producers of the good. (B) To have an impact in the market for the good, the price floor should be set below the existing market price of the good. (C) An effective price floor will increase the quantity demanded of the good. (D) The price floor would tend to create a shortage of the good in the market. (E) The creation of the price floor would not change the quantity supplied of the good if the supply curve were upward-sloping to the right. Questions 3-4 refer to the graph below. The market is currently in equilibrium. 14. Which of the following best illustrates the concept of consumer surplus? (A) A thirsty athlete pays $0.85 for a cold drink when she would have gladly paid $1.50 for the drink. (B) An individual who is willing to accept a job at $7.50 per hour is offered $7.00 per hour. (C) An individual pays the sale price of $15.00 for the same shirt that the individual refused to purchase earlier at $ (D) An individual finds that the price of artichokes, a food she dislikes, has been reduced by 50 percent. (E) A wood-carver has a marginal cost of $5.00 for a unit of output, but sells that unit at $ In a competitive equilibrium, consumer surplus is the area of (A) UVZ (B) WYZ (C) RVUT (D) XVZY (E) 0YZS 16. If a price floor is set at X, the quantity demanded will (A) increase from 0R to 0S (B) increase from 0R to 0T (C) decrease from 0S to 0R (D) decrease from 0T to 0R (E) not change

4 4 20. Consumer surplus is defined as (A) opportunity cost minus total revenue (B) total revenue minus opportunity cost (C) the difference between the resource costs and the price that consumers pay (D) the difference between the value that consumers place on a good and the price they pay (E) the sum of the external costs and benefits 17. The graph above shows the supply and demand curves for gasoline. Which of the following will occur if the government establishes a price ceiling of $1.20 per gallon. (A) A shortage of 900 million gallons (B) A shortage of 200 million gallons (C) A shortage of 100 million gallons (D) A surplus of 100 million gallons (E) Neither a surplus nor a shortage 18. An increase in which of the following will most likely result in a long-run surplus of a product? (A) The number of suppliers of the product (B) A price that is set by law above the equilibrium price (C) The demand for the product (D) The costs of resources used to produce the product (E) The future expected price of the product 19. Which of the following will occur if the government imposes a price ceiling below the equilibrium price of a good? (A) The quantity sold will exceed the equilibrium quantity. (B) Firms total revenues will increase if demand is price elastic. (C) There will be a shortage in the market. (D) All firms will shut down, since price is below the equilibrium prices. (E) Price will exceed the marginal cost of producing the last unit sold. 21. In the market shown in the graph above, at a price of $5, there will be (A) a surplus and the price will eventually fall (B) a surplus generating a decrease in demand (C) a shortage and the price will eventually rise (D) a shortage generating an increase in supply (E) an increase in supply and a decrease in demand 22. The difference between the price a consumer would be willing to pay for a cone of ice cream and the actual market price that she pays gives a measure of her (A) consumer surplus (B) producer surplus (C) marginal utility (D) marginal cost (E) ability to pay

5 5 23. The circular flow of economic activity between consumers and producers includes which of the following? I. Households buy factor services from firms. II. Households sell factor services to firms. III. Households buy outputs from firms. IV. Households sell outputs to firms. (A) III only (B) IV only (C) I and II only (D) II and III only (E) III and IV only 24. Which of the following is true according to the circular flow model? (A) Firms are suppliers in both the product and factor markets. (B) Firms are demanders in the product markets and suppliers in the factor markets. (C) Households are demanders in both the product and factor markets. (D) Households are demanders in the product markets and suppliers in the factor markets. (E) The government is a demander in the product market only. 25. Which of the following can be considered a leakage (money leaves the country) from the circular flow of economic activity? (A) Investment (B) Government expenditures (C) Consumption (D) Exports (E) Saving

6 AP MICROECONOMICS FREE-RESPONSE QUESTION #3 (FORM B) (a) (i) 1 (ii) 1 (iii) 1 (b) 1 1 (c) (i) 1 (ii) 1 /7 points

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