Free AP® Microeconomics Practice Test (2026)

Question 1

The price of a concert ticket rises from $8 to $12, and the quantity demanded falls from 110 to 90 tickets. Using the midpoint method, what is the price elasticity of demand, and what happens to total revenue?

Accepted Answer

0.5, inelastic; total revenue rises

Answer

2.0, elastic; total revenue falls

Answer

0.5, inelastic; total revenue falls

Answer

2.0, elastic; total revenue rises

Question 2

A perfectly competitive firm sells its output at $20 per unit. Its marginal cost is $8 for the 1st unit, $12 for the 2nd, $18 for the 3rd, $22 for the 4th and $28 for the 5th. How many units maximize its profit?

Accepted Answer

3

Answer

2

Answer

4

Answer

5

Question 3

Two firms, Alpha and Beta, each choose a High or a Low price. The payoffs (Alpha's profit, Beta's profit) are: both High (50, 50); Alpha High and Beta Low (20, 60); Alpha Low and Beta High (60, 20); both Low (30, 30). If they cannot cooperate, what is the Nash equilibrium?

Accepted Answer

Both choose Low

Answer

Both choose High

Answer

Alpha chooses High and Beta chooses Low

Answer

Alpha chooses Low and Beta chooses High

Question 4

Maya has a free afternoon. She can work 4 hours at $15 an hour, or she can go to a concert whose ticket costs $30. What is the opportunity cost of going to the concert?

Accepted Answer

$90

Answer

$30

Answer

$60

Answer

$45

Question 5

A firm sells its product in a perfectly competitive market at $5 per unit and hires workers in a perfectly competitive labor market at a wage of $35 per day. The marginal products of the 1st through 5th workers are 12, 10, 8, 6 and 4 units per day. How many workers should it hire?

Accepted Answer

3

Answer

2

Answer

4

Answer

5

Question 6

Demand for a good is Qd = 100 − 2P and supply is Qs = 3P. The government sets a price ceiling of $10. What is the result?

Accepted Answer

A shortage of 50 units

Answer

A surplus of 50 units

Answer

No effect, because the ceiling is below the equilibrium price

Answer

A shortage of 20 units

Question 7

A firm's total fixed cost is $100. When it produces 10 units, its total variable cost is $150. What is its average total cost at 10 units?

Accepted Answer

$25

Answer

$15

Answer

$10

Answer

$250

Question 8

Each unit a factory produces causes $10 of pollution damage to people who live nearby, and the factory does not pay for it. Which policy would move the market to the socially optimal quantity?

Accepted Answer

A $10 per-unit tax on the factory's output

Answer

A $10 per-unit subsidy to the factory

Answer

A $10 per-unit subsidy to the people who buy the product

Answer

A lump-sum tax on the factory that does not depend on its output

Question 9

A single-price monopolist can sell 10 units at $50 each. To sell 11 units, it must lower its price to $48 on all units. What is the marginal revenue of the 11th unit?

Accepted Answer

$28

Answer

$48

Answer

$2

Answer

$528

Question 10

In a market, demand and supply both increase at the same time. What can be said for certain about the new equilibrium?

Accepted Answer

Quantity rises, and the change in price is uncertain.

Answer

Price rises, and the change in quantity is uncertain.

Answer

Price falls, and quantity rises.

Answer

Both price and quantity rise.

Question 11

A perfectly competitive firm faces a market price of $12. At its profit-maximizing output, average total cost is $15 and average variable cost is $10. What should the firm do in the short run?

Accepted Answer

Keep producing, because price covers average variable cost, so its loss is smaller than if it shut down

Answer

Shut down, because it is earning an economic loss

Answer

Raise its price to $15 to cover its costs

Answer

Keep producing, because it is earning an economic profit

Question 12

A consumer spends her whole budget on goods X and Y. Good X costs $2, and the marginal utility of her last unit of X is 10 utils. Good Y costs $4, and the marginal utility of her last unit of Y is 40 utils. What should she do to maximize her utility?

Accepted Answer

Buy more Y and less X

Answer

Buy more X and less Y

Answer

Keep buying the same amounts of each

Answer

Buy more of both goods

Question 13

How does a profit-maximizing monopsony (the only employer of labor in a town) compare with a perfectly competitive labor market?

Accepted Answer

It hires fewer workers and pays a lower wage.

Answer

It hires more workers and pays a higher wage.

Answer

It hires more workers and pays a lower wage.

Answer

It hires the same number of workers and pays a lower wage.

Question 14

A market demand curve is a straight line from a price of $50 (at zero quantity) down to a quantity of 100 units (at a zero price). If the market price is $20, what is consumer surplus?

Accepted Answer

$900

Answer

$1,800

Answer

$600

Answer

$1,200

Question 15

Which is true of an unregulated, profit-maximizing, single-price monopoly?

Accepted Answer

It charges a price above marginal cost and produces less than the allocatively efficient quantity.

Answer

It produces where price equals marginal cost.

Answer

It produces at the minimum of its average total cost curve in the long run.

Answer

It charges the highest price that any single buyer is willing to pay.

Question 16

Firms in a perfectly competitive industry are earning economic profits, and there are no barriers to entry. What happens in the long run?

Accepted Answer

New firms enter, market supply increases, and price falls until economic profit is zero.

Answer

Firms leave, market supply decreases, and price rises.

Answer

Market demand increases until economic profit is zero.

Answer

Existing firms raise their prices to protect their profits.

Question 17

When the price of good A rises by 10%, the quantity demanded of good B falls by 5%. What is the cross-price elasticity of demand, and how are the goods related?

Accepted Answer

−0.5; complements

Answer

0.5; substitutes

Answer

−2.0; complements

Answer

2.0; substitutes

Question 18

With all other inputs fixed, a bakery's total output with 1, 2, 3 and 4 workers is 10, 24, 36 and 44 loaves a day. With which worker do diminishing marginal returns begin?

Accepted Answer

The 3rd worker

Answer

The 1st worker

Answer

The 2nd worker

Answer

The 4th worker

Question 19

A student's total utility from slices of pizza is 20 utils for 1 slice, 35 for 2 slices, 45 for 3 slices and 50 for 4 slices. What is the marginal utility of the 3rd slice?

Accepted Answer

10 utils

Answer

5 utils

Answer

15 utils

Answer

45 utils

Question 20

In long-run equilibrium, which is true of a firm in monopolistic competition?

Accepted Answer

Its price equals average total cost, but it produces less than the output that minimizes average total cost.

Answer

It earns positive economic profit because its product is differentiated.

Answer

Its price equals marginal cost, so it is allocatively efficient.

Answer

It produces at the minimum of average total cost, so it is productively efficient.

Question 21

For a firm, the marginal product of labor is 20 units and the wage is $10, while the marginal product of capital is 30 units and the rental price of capital is $30. What should the firm do to produce its current output at the lowest cost?

Accepted Answer

Use more labor and less capital

Answer

Use more capital and less labor

Answer

Keep its current mix, because capital has the higher marginal product

Answer

Cut its use of labor and capital by equal amounts

Question 22

The government places a $2 per-unit excise tax on a good whose demand is perfectly inelastic, and supply slopes upward. What happens?

Accepted Answer

The price buyers pay rises by the full $2, the quantity sold does not change, and there is no deadweight loss.

Answer

Sellers pay the whole tax, and the quantity sold falls.

Answer

Buyers and sellers split the tax equally, and a deadweight loss results.

Answer

The price buyers pay rises by $1, and the quantity sold falls.

Question 23

A monopolist is able to practice perfect (first-degree) price discrimination, charging each buyer the most that buyer is willing to pay. Compared with single-price monopoly, what happens?

Accepted Answer

Output rises to the allocatively efficient level, and consumer surplus becomes zero.

Answer

Output falls, and consumer surplus rises.

Answer

Output is unchanged, and deadweight loss rises.

Answer

Output rises, and consumer surplus rises.

Question 24

A bakery owner's revenue for the year is $500,000, and her explicit costs are $300,000. She could have earned $150,000 working for another firm instead. What are her accounting profit and economic profit?

Accepted Answer

$200,000 accounting profit and $50,000 economic profit

Answer

$500,000 accounting profit and $200,000 economic profit

Answer

$200,000 accounting profit and $350,000 economic profit

Answer

$50,000 accounting profit and $200,000 economic profit

Question 25

A city fireworks show is nonexcludable and nonrival. Why do private markets tend to provide too little of goods like this?

Accepted Answer

People can enjoy the good without paying, so many become free riders and sellers can't collect enough revenue.

Answer

One person's use of the good leaves less for others, which drives its price too high.

Answer

Governments usually set price ceilings on such goods.

Answer

Their marginal cost rises sharply as more people use them.

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