AP Micro Unit 2 Multiple Choice Questions

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1. The relationship between quantity supplied and price is _____ and the relationship between quantity
demanded and price is _____.
A. direct, inverse
B. inverse, direct
C. inverse, inverse
D. direct, direct
E. strong, weak
Answer: A

2. An increase in the price of a product will reduce the quantity demanded for that product because:
A. supply curves are upward sloping
B. the higher price means purchasing power has risen
C. consumers will substitute other products for the one whose price has risen
D. consumers get increasing marginal utility for each new unit of a good they consume
E. more complementary goods will be purchased due to the resultant increase in
consumer surplus
Answer: C

3. Which of the following will NOT cause the demand for video games to change?
A. a change in the price of a close substitute
B. a change in consumer incomes
C. a change in the price of video games
D. a change in consumer tastes
E. a change in consumer preferences
Answer: C

4. An economist for a computer company predicts that a rise in consumer incomes will increase the
demand for computers. This prediction assumes that
A. there are many substitutes for computers
B. there are many complementary goods for computers
C. there are few goods that are substitutes for computers
D. computers are normal goods
E. computers are an inferior good
Answer: D

5. Which of the following statements is correct?

A. A decrease in the price of X will increase the demand for substitute product Y
B. A decrease in income will decrease the demand for an inferior good
C. An increase in income will decrease the demand for a normal good
D. An increase in the price of X will decrease the demand for complementary product Y
E. An increase in the price of X will increase the demand for complementary product Y
Answer: D

6. A leftward shift of a supply curve for avocados (a normal good) might be caused by:
A. an improvement in avocado picking techniques
B. a decrease in the wages that must be paid to avocado pickers
C. an increase in consumer incomes
D. some avocado farmers leaving the market
E. a news report stating that avocados are associated with good health
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Answer: D
7. Assuming Ramen noodles are an inferior good, a decrease in income will shift the
A. supply curve for Ramen noodles to the left.
B. supply curve for Ramen noodles to the right.
C. demand curve for Ramen noodles to the left.
D. demand curve for Ramen noodles to the right
E. there is no shift
Answer: D

8. Which of the following events will cause the demand curve for hamburgers to shift to the right?
A. An increase in the price of hamburgers
B. An increase in the price of pizza, a substitute for hamburgers
C. An increase in the price of French fries, a complement to burgers
D. A decrease in the number of hamburger consumers
E. A decrease in the cost of producing hamburgers
Answer: B

Figure A

9. Refer to Figure A. At price $20, which of the following would occur?

A. Shortage of 100
B. Shortage of 150
C. Surplus of 200
D. Surplus of 50
E. Surplus of $100
Answer: D

10. Refer to Figure A. What would be the effect of a price floor at $60?
A. It would ineffective
B. A shortage of 50
C. Quantity demanded would increase
D. A shortage of 100
E. A surplus of 100
Answer: E

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11. 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
Answer: C

12. Other things equal, if the price of a key resource used to produce product X falls, the:
A. product supply curve of X will shift to the right.
B. product demand curve of X will shift to the right.
C. product supply curve of X will shift to the left.
D. product demand curve of X will shift to the left.
E. both the supply and demand of X will increase
Answer: A

13. Which of the following statements is correct?

A. If demand increases and supply decreases, equilibrium price will fall.
B. If the demand and the supply both fall at the same time, quantity will be indeterminate
C. If demand decreases and supply increases, equilibrium price will rise.
D. If supply increases and demand decreases, equilibrium price will fall.
E. If supply falls and demand remains constant, equilibrium price will fall.
Answer D

14. If Buyer’s Max=$300, Seller’s Min=$150, & Price=$350 then

A. consumer’s surplus is 50
B. consumer’s surplus is 100
C. producer’s surplus is 200
D. producer’s surplus is 50
E. there would be no exchange
Answer: E

15. Assume that consumers consider tea and coffee to be substitutes. A significant increase in the supply
of tea will affect the coffee market by
A. increasing the demand for coffee and therefore the supply of coffee
B. increasing the demand for coffee and therefore the price of coffee
C. decreasing the demand for coffee and therefore the price of coffee
D. increasing the supply of coffee and therefore the price of coffee
E. decreasing the supply of coffee and therefore the price of coffee
Answer: C

16. Assume that Jacob produces bicycles and tricycles. If the price and quantity of tricycles doubles,
which of the following is necessarily true?
A. The supply of tricycles must have decreased
B. The supply of bicycles will increase
C. The price of tricycles is higher than the price of bicycles
D. The price of bicycles will also double
E. The supply of bicycles will decrease
Answer: E

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17. Following a severe drought, the price of bottled water normally increases significantly. If cities had
passed laws prohibiting price increases for bottled water, during severe droughts such laws would most
likely
A. make bottled water more available
B. create a shortage of bottled water
C. shift the demand curve for bottled water to the right
D. shift the supply curve for bottled water to the left
E. have no effect on the availability of bottled water
Answer: B

18. According to the law of diminishing marginal utility, which of the following is true when consuming
marshmallows?
A. Total satisfaction decreases as more marshmallows are consumed.
B. The additional satisfaction received from consuming extra marshmallows decreases as
consumption of the good increases.
C. The additional satisfaction received from consuming extra marshmallows decreases as
consumption of the good decreases.
D. The additional satisfaction received from consuming extra marshmallows increases as
consumption of the good increases.
E. When marginal marshmallow utility is decreasing, total marshmallow utility must also be
decreasing.
Answer: B

19. Which of the following would most likely result in an increase in the equilibrium price of avocados, a
normal good?
A. The weather during this avocado-growing season is better than last year
B. An decrease in the price of almonds, a substitute for avocados
C. New studies suggest that avocados contain traces of cancer-fighting substances
D. A national recession decreases per capita income by 15%
E. Firms enter the avocado industry seeking to compete for a share of the profits
Answer: C

20. Promoters of a traveling circus know that if they charged $5 a ticket, 200 people would buy tickets
for the circus, and if they charged $2 a ticket, 800 people would buy tickets. Over this price range, the
demand for the tickets for the traveling circus is
A. relatively elastic
B. relatively inelastic
C. unit elastic
D. perfectly elastic
E. perfectly inelastic
Answer: A

21. Assume that people like sauerkraut with their bratwurst. If the supply of bratwurst increases, the
demand for sauerkraut will most likely
A. remain unchanged because bratwurst and sauerkraut are different goods
B. increase because bratwurst and sauerkraut are substitutes
C. increase because bratwurst and sauerkraut are complements
D. decrease because bratwurst and sauerkraut are complements
E. decrease because bratwurst and sauerkraut are substitutes
Answer: C
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22. A decrease in the effective minimum wage will have less of an impact on employment if the demand
for labor is
A. increasing
B. decreasing
C. relatively elastic
D. relatively inelastic
E. unit elastic
Answer: D
23. Suppose that the market supply curve for milk is upward sloping and the market demand curve is
downward sloping. How will the passage of a subsidy for dairy farmers affect the consumer surplus, the
producer surplus, and the total surplus?
Consumer Surplus Producer Surplus Total Surplus
A. Increase Increase Increase
B. Increase Increase Decrease
C. Increase Decrease Decrease
D. Decrease Increase Decrease
E. Decrease Decrease Decrease
Answer: A

24. Considering chimichangas, delicious deep-fried burritos, which of the following best describes the
law of demand?
A. The price of chimichangas increases when the demand for chimichangas increases
B. The price of chimichangas decreases when the supply of chimichangas decreases
C. When the price of chimichangas increases, demand for chimichangas decreases
D. When the price of chimichangas increases, the quantity of chimichangas demanded increases
E. When the price of chimichangas decreases, the quantity of chimichangas demanded increases
Answer: E

25. Which of the following will cause the supply curve for doughnuts to shift to the right?
A. An increase in the price of coffee, assuming that doughnuts and coffee are complements
B. A decrease in the price of muffins, assuming that doughnuts and muffins are substitutes
C. An increase in the wages of doughnut makers
D. An increase in the number of firms producing doughnuts
E. A decrease in the income of consumers, assuming that doughnuts are normal goods
Answer: D

26. Citing the epidemic of obesity and type 2 diabetes in America, congress approves a new tax on
producers of high fructose corn syrup, one of the key ingredients in soda pop. The price paid by
consumers and the quantity of soda pops sold will most likely change in which of the following ways?
Price Quantity
A. Increase Decrease
B. Increase Increase
C. Decrease Increase
D. Decrease Decrease
E. No change No change
Answer: A

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27. Which of the following will tend to make the demand for suspenders more elastic?
A. New firms which produce similar products (such as belts) enter the industry
B. A very popular celebrity starts wearing suspenders, making the product more desirable
C. Suspenders are necessary for use with a complement
D. Production of suspenders is protected by a patent
E. Production cost of suspenders decreases
Answer: A

28. Which of the following will not change the demand for corn?

A. an increase in the price of a close substitute

B. consumers prefer less corn
C. the incomes of consumers
D. the price of corn
E. research showing health benefits of corn

Answer: D [Link]

29. An economist for a skateboard company predicts that a rise in consumer incomes will increase the
demand for skateboards. This prediction assumes that:

A. there are many substitutes for skateboards

B. skateboards have inelastic demand
C. skateboards have a downward sloping demand curve.
D. skateboards are a normal good
E. skateboards are an inferior good

Answer: D

30. A leftward shift in the supply curve for pianos could be caused by

A. an increase in the wages of workers that make pianos

B. improvements in the productivity of piano makers
C. decrease in the price of piano parts
D. decrease in consumer income
E. an increase in the price of pianos

Answer: A [Link]

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31. A decrease in the price of a substitute product will change the equilibrium price and quantity in a
market in which of the following ways?

Price Quantity

A. Increase Decrease
B. Increase Increase
C. Decrease Decrease
D. Decrease Increase
E. Not change Decrease

Answer: c [Link]

32. If the demand for a product increased at the same time that technological improvements lowered
production costs, what would happen to the price and quantity?

A. both price and quantity would increase

B. both price and quantity would decrease
C. price would increase and quantity would decrease
D. price would increase and quantity would be indeterminate
E. price would be indeterminate and quantity would increase

Answer: E [Link]

33. Which of the following would most likely occur if the government imposed a binding price ceiling

A. quantity sold will increase

B. there will be a surplus
C. quantity demanded will increase
D. demand will increase
E. supply will shift to the right

Answer: c [Link]

34. Assume the price of a specific good decreases from $12 to $10 per unit and the quantity demanded
increased from 10 to 15. Which of the following is true?

A. The demand for this good is unit elastic in this price range
B. The demand for this good is relatively inelastic in this price range
C. The demand for this good is relatively elastic in this price range
D. The demand for this good is perfectly elastic
E. Firms would lower their price
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Answer: C [Link]

35. The difference between the price a person is willing to pay for a taco and the market price that they
did pay is called:

A. marginal utility
B. disequilibrium
C. consumer surplus
D. producer surplus
E. dead-weight loss

Answer: C

36. Assume a market is currently at equilibrium. If the government provides a per unit subsidy to
producers, what will happen to price, quantity, and consumer surplus?

Price Quantity Consumer Surplus

a. Increase Decrease Decrease
b. Decrease Decrease Increase
c. Decrease Decrease Decrease
d. Decrease Increase Increase
e. Decrease Increase Decrease

Answer: D

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 1. Which of the following is true for the market above?
a. Consumer surplus is $250
b. At a price of $30 there would be a surplus
c. A price floor at $30 would decrease the quantity produced

d. Consumer surplus is $500

e. At $70 the quantity demanded is greater than the quantity supplied

Answer: a

Consumer surplus is the area of the triangle below. The answer is not B because at price $30 there
would be a shortage. It is not C because a price floor below equilibrium has no effect. It is not D because
producer surplus is $150 (not D because you must divide by 2 for the area of a triangle). It is not E
because at $70 the Qs is greater than the Qd.

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37. Product X has an income elasticity of demand coefficient of -2. It also has a cross-price elasticity of
demand coefficient of -2 with product Y. Which of the following is true?

A. An increase in the price for product X will cause an increase in total revenue for product X
B. Product X and product Y are substitutes
C. Product Y is an inferior good
D. The demand for product X is relatively elastic
E. An increase in the price of product Y will decrease the demand for product X

Answer: E [Link]

38. The graph above shows the domestic supply and demand for a product. Assuming this country can
import the product at a world price of $5, all the following are true EXCEPT:

A. Domestic producer surplus will be E

B. Domestic consumer surplus will be ABCD
C. The sum of producer and consumer surplus will increase
D. A shortage will develop since quantity demanded is greater than the quantity supplied
E. This country will import 50 units

Answer: D

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39. The product above is subject to a per unit excise tax. Identify the consumer surplus before the tax,
the consumer surplus after the tax, and the total tax revenue that goes to the government

CS Before Tax CS After Tax Tax Revenue

a. ABCD A BCEIJ
b. ABCD A BCE
c. ABCD AB EIJ
d. ABCD AB E
e. IEF I BCE

Answer: B

40. Assume the demand for a product is relatively inelastic and the supply is relatively elastic. A per unit
excise tax will cause

A. price and quantity to increase

B. consumers to pay a larger portion of the tax burden
C. producers to pay a larger portion of the tax burden
D. consumers and producers to share the tax burden equally
E. a permanent shortage

Answer: B

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