AP Micro - Midterm review - Day 1

Which of the following conditions causes scarcity?

• increase in supply and demand
• increase in supply and decrease in demand
• decrease in supply and increase in demand
• increase supply and no change in demand

Which of the following is the best definition of opportunity costs?

• the amount of one good that must be given up in order to produce one more unit of another good
• the amount of an input that must be used in order to produce one more unit of a good
• the price of a good that must be charged in order for a merchant to sell one more unit
• none of the above

A downward sloping demand curve can be explained by

I. diminishing marginal utility

II. diminishing marginal returne

III. substitution effect

IV. the income effect

• I only

• II only

• I and III only

• I and IV only

• I, III, and IV only

If hot dogs are an inferior good, an increase in income will result in

• an increase in the quantity demanded for hot dogs

• an increase in the demand for hot dogs

• a decrease in the quantity demanded for hot dogs

• a decrease in the demand for hot dogs

• no change in the demand for hot dogs

Assume that coal is a normal good. If the price of coal increases and the quantity sold increases, which of the following is consistent with these observations?

• the price of oil, a substitute for coal, increases

• a wage increase was given to coal miners

• new machinery made coal mining more efficient

• consumers' incomes fell

• the demand curve is inelastic

The demand curve for a perfectly competitive firm is:

• perfectly inelastic.
• perfectly elastic.
• downward sloping.
• relatively but not perfectly elastic.

What should you do?

• Shut Down
• Take loss but stay open
• Stay open, Normal Profit
• Stay open, Positive Economic Profit

What should you do?

• Shut Down
• Stay open and take a loss
• Stay open, Positive Economic Profit
• Stay open, Normal Profit

What is the opportunity cost of moving from point B to C on the curve?

• 30 tons of wheat
• 30 tons of steel
• 5 tons of wheat
• 5 tons of steel

Juice and tea are substitutes. If the price of tea increases, what will happen in the market for juice?

• supply increase
• supply decrease
• demand increase
• demand decrease