AP Microeconomics Exam Review 3
questions with complete solutions
True nnstatements nnabout nnthe nntheory nnof nnthe nnfirm nnin nnthe nnshort nnrun nnand nnlong nnrun nninclude nnwhich
nnof nnthe nnfollowing? nn- nncorrect nnanswer-E) nnII nnand nnIII nnonly
On nnthe nngraph nnabove, nnthe nnonset nnof nndiminishing nnmarginal nnreturns nnoccurs nnbeyond nn- nncorrect
nnanswer-C) nnPoint nnC
Which nnof nnthe nnfollowing nnstatements nnabout nna nnfirm's nnproduction nnfunction nnare nntrue? nn- nncorrect
nnanswer-D) nnI, nnIII, nnand nnIV
According nnto nnthe nngraph nnabove, nnif nnthe nnfirm nnis nnproducing nnany nnquantity nngreater nnthan nnQ2, nnthe
nnfirm nnis nnexperiencing nn- nncorrect nnanswer-C) nnDiseconomies nnof nnscale
For nna nnperfectly nncompetitive nnfirm, nnif nnthe nnmarket nnprice nnis nn$8 nnthen nn- nncorrect nnanswer-C) nnmarginal
nnrevenue nnis nnequal nnto nn$8
A nnfirm's nnshort-run nnmarginal nncost nncurve nnwill nneventually nnincrease nnbecause nnof nn- nncorrect nnanswer-D)
nndiminishing nnmarginal nnreturns
Assume nnthat nnin nnthe nnshort nnrun nnat nnthe nnprofit-maximizing nnoutput, nnthe nnprice nnis nnlower nnthan
nnaverage nnvariable nncost. nnThe nnperfectly nncompetitive nnfirm nnshould nn- nncorrect nnanswer-E) nnshut nndown
Assume nnthat nna nnperfectly nncompetitive nnfirm nnis nnoperating nnwhere nnmarginal nnrevenue nnis nngreater nnthan
nnmarginal nncosts. nnTo nnincrease nnprofits, nnthe nnfirm nnshould nn- nncorrect nnanswer-A) nnincrease nnproduction
If nnthe nnaverage nnvariable nncost nnof nnproducing nnfive nnunits nnof nna nnproduct nnis nn$100 nnand nnthe nnaverage
nnvariable nncost nnof nnproducing nnsix nnunits nnis nn$125, nnthen nnthe nnmarginal nncost nnof nnproducing nnthe nnsixth
nnunit nnis nn- nncorrect nnanswer-C) nn$250
, If nnthe nnfirm nnis nnin nnshort-run nnequilibrium nnat nna nnprice nnof nnP4, nna nnperfectly nncompetitive nnfirm nnwill
nnmaximize nnprofits nnby nnproducing nnat nnwhich nnof nnthe nnfollowing nnlevels nnof nnoutput? nn- nncorrect nnanswer-
E) nnQ4
At nnwhich nnprice nnwill nnthis nnperfectly nncompetitive nnfirm nnmake nnan nneconomic nnprofit? nn- nncorrect
nnanswer-E) nnP4
Which nnprice-quantity nncombination nnrepresents nnlong-run nnequilibrium nnfor nnthis nnperfectly nncompetitive
nnfirm? nn- nncorrect nnanswer-D) nnPoint nnD
According nnto nnthe nngraph nnabove, nnif nnthe nnfirm nnis nnproducing nnat nnQ, nnthe nnfirm nnis nn- nncorrect nnanswer-D)
nnmaking nnnormal nnprofits nnbecause nnthe nnprice nnjust nncovers nnaverage nntotal nncost
Which nnof nnthe nnfollowing nnrepresents nnthe nncorrect nnrelationship nnbetween nnthe nndemand nncurve nnfor nna
nnperfectly nncompetitive nnindustry nnand nnthe nndemand nncurve nnfor nna nnperfectly nncompetitive nnfirm nn-
nncorrect nnanswer-B) nnPC nnIndustry nnDemand:
Downward nnslope nnto nnthe nnright
PC nnFirm nnDemand:
Perfectly nnelastic
According nnto nnthe nngraph nnabove, nnin nnwhich nnof nnthe nnfollowing nnways nnare nnthe nnindustry nnsupply nncurve
nnand nnthe nnequilibrium nnprice nnmost nnlikely nnto nnchange nnin nnthe nnlong nnrun? nn- nncorrect nnanswer-B)
nnIndustry nnSupply: nnDecrease
Equilibrium nnPrice: nnIncrease
If nnprice nnis nnP2, nnthe nnfirm nnwill nn- nncorrect nnanswer-C) nnProduce nnQ2 nnunits nnand nnearn nnan nneconomic
nnprofit.
If nnprice nnis nnP1, nnthe nnfirm nnwill nn- nncorrect nnanswer-C) nnProduce nnQ1 nnunits nnand nnearn nna nnnormal nnprofit
Which nnof nnthe nnfollowing nnis nntrue nnof nna nnpure nnmonopolist's nndemand nncurve? nn- nncorrect nnanswer-E) nnIt
nnlies nnabove nnits nnmarginal nnrevenue nncurve
questions with complete solutions
True nnstatements nnabout nnthe nntheory nnof nnthe nnfirm nnin nnthe nnshort nnrun nnand nnlong nnrun nninclude nnwhich
nnof nnthe nnfollowing? nn- nncorrect nnanswer-E) nnII nnand nnIII nnonly
On nnthe nngraph nnabove, nnthe nnonset nnof nndiminishing nnmarginal nnreturns nnoccurs nnbeyond nn- nncorrect
nnanswer-C) nnPoint nnC
Which nnof nnthe nnfollowing nnstatements nnabout nna nnfirm's nnproduction nnfunction nnare nntrue? nn- nncorrect
nnanswer-D) nnI, nnIII, nnand nnIV
According nnto nnthe nngraph nnabove, nnif nnthe nnfirm nnis nnproducing nnany nnquantity nngreater nnthan nnQ2, nnthe
nnfirm nnis nnexperiencing nn- nncorrect nnanswer-C) nnDiseconomies nnof nnscale
For nna nnperfectly nncompetitive nnfirm, nnif nnthe nnmarket nnprice nnis nn$8 nnthen nn- nncorrect nnanswer-C) nnmarginal
nnrevenue nnis nnequal nnto nn$8
A nnfirm's nnshort-run nnmarginal nncost nncurve nnwill nneventually nnincrease nnbecause nnof nn- nncorrect nnanswer-D)
nndiminishing nnmarginal nnreturns
Assume nnthat nnin nnthe nnshort nnrun nnat nnthe nnprofit-maximizing nnoutput, nnthe nnprice nnis nnlower nnthan
nnaverage nnvariable nncost. nnThe nnperfectly nncompetitive nnfirm nnshould nn- nncorrect nnanswer-E) nnshut nndown
Assume nnthat nna nnperfectly nncompetitive nnfirm nnis nnoperating nnwhere nnmarginal nnrevenue nnis nngreater nnthan
nnmarginal nncosts. nnTo nnincrease nnprofits, nnthe nnfirm nnshould nn- nncorrect nnanswer-A) nnincrease nnproduction
If nnthe nnaverage nnvariable nncost nnof nnproducing nnfive nnunits nnof nna nnproduct nnis nn$100 nnand nnthe nnaverage
nnvariable nncost nnof nnproducing nnsix nnunits nnis nn$125, nnthen nnthe nnmarginal nncost nnof nnproducing nnthe nnsixth
nnunit nnis nn- nncorrect nnanswer-C) nn$250
, If nnthe nnfirm nnis nnin nnshort-run nnequilibrium nnat nna nnprice nnof nnP4, nna nnperfectly nncompetitive nnfirm nnwill
nnmaximize nnprofits nnby nnproducing nnat nnwhich nnof nnthe nnfollowing nnlevels nnof nnoutput? nn- nncorrect nnanswer-
E) nnQ4
At nnwhich nnprice nnwill nnthis nnperfectly nncompetitive nnfirm nnmake nnan nneconomic nnprofit? nn- nncorrect
nnanswer-E) nnP4
Which nnprice-quantity nncombination nnrepresents nnlong-run nnequilibrium nnfor nnthis nnperfectly nncompetitive
nnfirm? nn- nncorrect nnanswer-D) nnPoint nnD
According nnto nnthe nngraph nnabove, nnif nnthe nnfirm nnis nnproducing nnat nnQ, nnthe nnfirm nnis nn- nncorrect nnanswer-D)
nnmaking nnnormal nnprofits nnbecause nnthe nnprice nnjust nncovers nnaverage nntotal nncost
Which nnof nnthe nnfollowing nnrepresents nnthe nncorrect nnrelationship nnbetween nnthe nndemand nncurve nnfor nna
nnperfectly nncompetitive nnindustry nnand nnthe nndemand nncurve nnfor nna nnperfectly nncompetitive nnfirm nn-
nncorrect nnanswer-B) nnPC nnIndustry nnDemand:
Downward nnslope nnto nnthe nnright
PC nnFirm nnDemand:
Perfectly nnelastic
According nnto nnthe nngraph nnabove, nnin nnwhich nnof nnthe nnfollowing nnways nnare nnthe nnindustry nnsupply nncurve
nnand nnthe nnequilibrium nnprice nnmost nnlikely nnto nnchange nnin nnthe nnlong nnrun? nn- nncorrect nnanswer-B)
nnIndustry nnSupply: nnDecrease
Equilibrium nnPrice: nnIncrease
If nnprice nnis nnP2, nnthe nnfirm nnwill nn- nncorrect nnanswer-C) nnProduce nnQ2 nnunits nnand nnearn nnan nneconomic
nnprofit.
If nnprice nnis nnP1, nnthe nnfirm nnwill nn- nncorrect nnanswer-C) nnProduce nnQ1 nnunits nnand nnearn nna nnnormal nnprofit
Which nnof nnthe nnfollowing nnis nntrue nnof nna nnpure nnmonopolist's nndemand nncurve? nn- nncorrect nnanswer-E) nnIt
nnlies nnabove nnits nnmarginal nnrevenue nncurve
