AP Micro Midterm Exam

To alleviate a financial crisis, a university increases student fees. This action will increase university revenues if the price elasticity of demand for university education is 4MIM8.

• inelastic

• unit elastic

• elastic

• equal to the price elasticity of supply

• equal to one

Which of the following is a defining characteristic of a market economy?

• Private ownership of resources

• Equitable distribution of income

• Taxation of personal income

• Reliance on public goods

• Government-guided resource allocation

Which of the following statements relating to supply is true? 4MIM9

• An increase in an input price will lead to an increase in supply.

• An increase in the price of a good will lead to an increase in the supply of the good.

• A decrease in consumers’ income will lead to a decrease in the supply of the good.

• A decrease in the price of a good will lead to a decrease in the quantity supplied of the good.

• A decrease in the price of a substitute good in production will lead to a decrease in the supply of another substitute good.

Which of the following is NOT an example of physical capital?

• A delivery truck

• A warehouse

• Office furniture

• Machinery

• Land

A linear production possibilities curve indicates which of the following?

• Constant opportunity costs

• Decreasing opportunity costs

• Increasing opportunity costs

• Diminishing marginal returns

• Labor-intensive production

Which of the following occurs if the price of oranges is below the equilibrium price?

• There is a surplus of oranges.

• The quantity supplied of oranges is greater than the quantity demanded.

• The quantity supplied of oranges is greater than the quantity sold.

• The quantity purchased of oranges is greater than the quantity sold.

• The quantity demanded of oranges is greater than the quantity supplied.

If a 10 percent increase in the price of a good leads to a 25 percent decrease in the quantity demanded of the good, demand is

• relatively inelastic

• relatively elastic

• unit elastic

• perfectly elastic

• perfectly inelastic

The economic concept of total consumer surplus refers to which of the following?

• The difference between the quantity of a good or service that people purchase and the amount that they actually consume

• The overproduction of goods and services relative to the socially optimal level of output

• The sum of the differences between the prices that consumers are willing to pay for a good or service and the price they actually pay

• The sum of the differences between the prices that consumers are willing to pay for a good or service and the minimum prices that sellers must receive to offer that quantity

• The difference between the quantity demanded and the quantity supplied of a product at a given price

According to the law of demand, an increase in the price of grape juice will result in

• a rightward shift in the demand curve for grape juice

• a leftward shift in the demand curve for grape juice

• a decrease in the demand for orange juice, a substitute

• a decrease in the quantity of grape juice demanded

• an increase in the quantity of grape juice supplied

Assume that consumers consider popcorn and pretzels to be substitutes. A significant decrease in the supply of popcorn will affect the pretzel market by

• increasing the demand for pretzels and therefore the supply of pretzels

• increasing the demand for pretzels and therefore the price of pretzels

• decreasing the demand for pretzels and therefore the price of pretzels

• increasing the supply of pretzels and therefore the price of pretzels

• decreasing the supply of pretzels and therefore the price of pretzels