MicroIQ · AP Microeconomics

MicroIQ Mock Exam 1 — Mid-Course Diagnostic

Coverage: Units 1–3 (Lessons 1–9), with a light preview of Unit 4 Format: Half-length AP simulation

Section	Questions	Time
I: Multiple choice	30 (5 choices)	35 minutes
II: Free response	1 long + 1 short	30 minutes

Rules: Four-function calculator allowed. No penalty for guessing — answer everything. Set a real timer; pacing practice is half the value of a mock.

Scoring: MC = 2 points each (60). Long FRQ = 20 points scaled from its 10-point rubric ×2. Short FRQ = 10 points scaled from its 5-point rubric ×2. Total 90. Calibration: 72+ ≈ on pace for a 5 · 60–71 ≈ 4 · 48–59 ≈ 3.

SECTION I: Multiple Choice (35 minutes)

Question 1

The fundamental economic problem of scarcity exists because:

(A) prices are set too high for many consumers
(B) governments interfere with free markets
(C) resources are limited while wants are unlimited
(D) income is unequally distributed
(E) production technology improves too slowly

Question 2

Kayla can spend the evening studying (which she values at $50 of future benefit), working a $45 shift, or attending a free workshop she values at $30. If she chooses to study, her opportunity cost is:

(A) $30
(B) $45
(C) $75
(D) $50
(E) $95

Question 3

An economy producing on its bowed-out PPC moves along the curve to produce more consumer goods. This movement illustrates:

(A) economic growth
(B) increasing opportunity cost
(C) unemployment of resources
(D) technological progress
(E) constant returns to scale

Question 4

With equal resources, Alba produces 24 tractors or 12 boats; Cova produces 9 tractors or 9 boats. Which statement is true?

(A) Alba has comparative advantage in boats
(B) Cova has absolute advantage in tractors
(C) Cova has comparative advantage in boats
(D) Alba should export boats and import tractors
(E) mutually beneficial trade is impossible

Question 5

From question 4, which terms of trade benefit both countries?

(A) 1 boat for 2.5 tractors
(B) 1 boat for 1.5 tractors
(C) 1 boat for 0.5 tractors
(D) 1 boat for 3 tractors
(E) 1 tractor for 2 boats

Question 6

Which of the following shifts the demand curve for coffee to the right?

(A) a fall in the price of coffee
(B) a fall in the price of tea, a substitute
(C) a rise in the price of coffee creamer, a complement
(D) a news report linking coffee to longer lifespans
(E) an improvement in coffee-roasting technology

Question 7

The market for lumber is in equilibrium. New tariffs raise the cost of imported saw blades (an input), while a housing boom raises the demand for lumber. Equilibrium price will __ and equilibrium quantity will ____.

(A) rise; rise
(B) rise; be indeterminate
(C) be indeterminate; rise
(D) fall; fall
(E) be indeterminate; be indeterminate

Question 8

Qd = 90 − 3P and Qs = 10 + 5P. At the equilibrium price:

(A) quantity is 45
(B) a shortage of 20 exists
(C) quantity is 50
(D) a surplus of 10 exists
(E) quantity is 60

Question 9

If the price of a good rises 10% and total revenue falls, demand is:

(A) perfectly inelastic
(B) inelastic
(C) unit elastic
(D) elastic
(E) upward-sloping

Question 10

Using the midpoint method, when price falls from $22 to $18 and quantity demanded rises from 90 to 110, the price elasticity of demand is:

(A) 0.5
(B) 2.0
(C) 0.2
(D) 1.0
(E) 4.0

Question 11

Demand for gasoline is more elastic in the long run than in the short run because over time consumers can:

(A) earn more income
(B) shift the supply curve
(C) negotiate lower prices with sellers
(D) store gasoline for future use
(E) find substitutes such as transit, carpools, and efficient vehicles

Question 12

The income elasticity of demand for a good is −0.6. The good is:

(A) a luxury
(B) a substitute
(C) elastic
(D) a complement
(E) an inferior good

Question 13

A binding price ceiling in a competitive market causes quantity traded to:

(A) fall to the quantity supplied at the ceiling price
(B) rise to the quantity demanded at the ceiling price
(C) remain at the original equilibrium quantity
(D) fall to zero
(E) equal the surplus created

Question 14

A $6 per-unit tax is imposed on sellers. Buyers end up paying $4 more per unit than before. Which must be true?

(A) sellers bear $4 of the tax per unit
(B) demand is perfectly elastic
(C) sellers receive $2 less per unit than before, bearing the smaller burden because supply is relatively more elastic than demand
(D) government revenue equals $6 times the original quantity
(E) deadweight loss is zero

Question 15

Consumer surplus at a market equilibrium is the area:

(A) between the supply and demand curves at all quantities
(B) below the demand curve and above the equilibrium price, up to the quantity traded
(C) above the supply curve and below the equilibrium price
(D) below the equilibrium price and above the quantity axis
(E) between the demand curve and the quantity axis

Question 16

Nadia allocates her budget between apps ($2 each) and snacks ($1 each). The marginal utility of her last app is 12 utils; of her last snack, 8 utils. To maximize utility she should:

(A) buy more apps and fewer snacks
(B) buy more snacks and fewer apps
(C) keep her current bundle
(D) buy equal numbers of each
(E) spend all remaining income on apps

Question 17

Total utility from consuming successive slices of pizza: 20, 36, 48, 56, 60, 60. Marginal utility first equals zero at the:

(A) 3rd slice
(B) 4th slice
(C) 5th slice
(D) 6th slice
(E) marginal utility never equals zero

Question 18

The law of diminishing marginal returns states that as more workers are added to a fixed amount of capital:

(A) total product must fall
(B) average product rises continuously
(C) marginal product eventually declines
(D) marginal cost eventually declines
(E) fixed costs rise

Question 19

A firm's total cost rises from $500 to $560 when output rises from 20 to 22 units. Marginal cost per unit over this range is:

(A) $60
(B) $25
(C) $28
(D) $3
(E) $30

Question 20

At Q = 50, a firm's ATC = $9 and AFC = $4. Its total variable cost at Q = 50 is:

(A) $450
(B) $200
(C) $250
(D) $130
(E) $650

Question 21

Which is true at the output where MC crosses ATC?

(A) ATC is at its minimum
(B) AVC is at its minimum
(C) profit is maximized
(D) AFC is at its minimum
(E) MC is at its minimum

Question 22

Diseconomies of scale occur when:

(A) marginal product falls in the short run
(B) long-run average total cost rises as output expands
(C) fixed costs are spread over more units
(D) a firm produces below minimum efficient scale
(E) AVC exceeds ATC

Question 23

Rita quit an $80,000 job and invested $100,000 of savings (previously earning 5%) to start a firm. First-year revenue is $300,000 and explicit costs are $210,000. Rita's economic profit is:

(A) $90,000
(B) $10,000
(C) $5,000
(D) −$5,000
(E) $85,000

Question 24

A perfectly competitive firm is producing where MR = MC. Price is $14, ATC is $11, AVC is $8, at an output of 200 units. The firm is:

(A) earning a $600 economic profit and should continue producing
(B) earning zero economic profit
(C) incurring a $600 loss and should shut down
(D) incurring a loss but covering variable costs
(E) violating the profit-maximizing rule

Question 25

A perfectly competitive firm should shut down in the short run when price falls below:

(A) ATC at every output
(B) MC at every output
(C) AFC
(D) minimum AVC
(E) the long-run equilibrium price

Question 26

Firms in a perfectly competitive industry are earning economic losses. In the long run:

(A) supply increases as firms enter
(B) demand falls until losses disappear
(C) some firms exit, market supply decreases, price rises, and remaining firms return to normal profit
(D) all firms exit the industry
(E) the government must subsidize the industry

Question 27

In long-run equilibrium, perfect competition achieves allocative efficiency because:

(A) firms produce at minimum ATC
(B) economic profits are maximized
(C) fixed costs are zero
(D) demand is perfectly elastic
(E) price equals marginal cost

Question 28

Unlike a perfectly competitive firm, a single-price monopolist's marginal revenue is:

(A) equal to price at every quantity
(B) horizontal at the market price
(C) below price, because selling more requires lowering the price on all units
(D) above price at low outputs
(E) always negative

Question 29

A monopolist maximizes profit at Q = 100, where MC = $6. The demand curve at Q = 100 shows a price of $15. The monopolist charges:

(A) $6
(B) $9
(C) $21
(D) $15
(E) $10.50

Question 30

Compared with perfect competition (same costs), a single-price monopoly produces:

(A) less output, charges a higher price, and creates deadweight loss
(B) more output at a lower price with no deadweight loss
(C) the same output at a higher price
(D) less output at a lower price
(E) the allocatively efficient output

SECTION II: Free Response (30 minutes)

FRQ 1 (Long — ~20 minutes)

The perfectly competitive market for organic eggs is in long-run equilibrium.

(a) Draw correctly labeled side-by-side graphs of the organic egg market and a typical egg farm. Show: (i) equilibrium price P₁ and quantity Q₁ in the market (ii) the farm's demand/MR curve, MC curve, and ATC curve (iii) the farm's output q₁

(b) Identify the typical farm's economic profit at q₁. Explain how your graph shows this.

(c) A documentary causes a permanent increase in consumer demand for organic eggs. (i) Show the short-run effects on both panels of your graph, labeling the new price P₂ and the farm's new output q₂. (ii) Is the typical farm now earning economic profit, incurring a loss, or breaking even? Explain.

(d) Describe the long-run adjustment process, including what happens to the number of firms, market supply, market price, and the typical farm's economic profit.

(e) In the new long-run equilibrium, is the typical farm producing at minimum ATC? What is this property called?

FRQ 2 (Short — ~10 minutes)

The competitive market for ride-scooter rentals in Doville has equilibrium price $10 per hour and equilibrium quantity 5,000 hours per day. The city council imposes a price ceiling of $7 per hour. At $7, quantity supplied is 3,500 hours and quantity demanded is 6,500 hours.

(a) Draw a correctly labeled supply-and-demand graph showing the equilibrium, the price ceiling, and the quantities at the ceiling price.

(b) Calculate the size of the shortage at the ceiling price.

(d) Identify the area of deadweight loss on your graph and explain in one sentence why society loses this surplus.

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Show answer key & explanations

ANSWER KEY & EXPLANATIONS

Section I

1. (C) The definition of scarcity: limited resources vs. unlimited wants. Everything else is a symptom or a separate issue.

2. (B) Kayla chose studying, so her opportunity cost is the highest-valued alternative forgone: the $45 shift. (D) is the value of the option she took; (C) wrongly adds the alternatives.

3. (B) Moving along a bowed PPC toward more consumer goods sacrifices increasing amounts of the other good per unit gained — the law of increasing opportunity cost.

4. (C) Alba: 1 boat costs 2 tractors. Cova: 1 boat costs 1 tractor. Cova sacrifices less per boat → comparative advantage in boats (Alba in tractors: ½ boat < 1 boat).

5. (B) Boats must trade for between 1 tractor (Cova's cost) and 2 tractors (Alba's cost): 1.5 works. (D) 3 exceeds Alba's cost; (C) 0.5 is below Cova's.

6. (D) Tastes shift demand right. (A) is a movement along; (B) and (C) shift demand left; (E) shifts supply.

7. (B) Input cost ↑ → supply left (P↑, Q↓). Housing boom → demand right (P↑, Q↑). Price rises unambiguously; quantity depends on magnitudes.

8. (E) 90 − 3P = 10 + 5P → 80 = 8P → P = 10; Q = 90 − 30 = 60. Check: 10 + 50 = 60 ✓.

9. (D) Price ↑ with TR ↓ → quantity effect dominated → elastic.

10. (D) %ΔQ = 20/100 = 20%; %ΔP = −4/20 = −20%; |PED| = 1.0 → unit elastic.

11. (E) Time allows substitution — the key long-run elasticity driver.

12. (E) Negative income elasticity defines an inferior good.

13. (A) Sellers won't supply more than Qs at the ceiling price; the short side rules.

14. (C) Buyers bear $4, sellers bear $6 − $4 = $2. The side bearing less is relatively more elastic. (D) is wrong because revenue uses the new (lower) quantity.

15. (B) CS = area under demand, above price, out to the traded quantity.

16. (B) Apps: 12/2 = 6 utils/$; snacks: 8/1 = 8 utils/$. Snacks deliver more per dollar → reallocate toward snacks.

17. (D) MU: 20, 16, 12, 8, 4, 0 — zero at the 6th slice (TU flat at 60).

18. (C) Definition of diminishing marginal returns; total product still rises while MP > 0 (A wrong), and MC rises as MP falls (D wrong).

19. (E) ΔTC/ΔQ = 60/2 = $30.

20. (C) AVC = ATC − AFC = 5; TVC = 5 × 50 = $250. (A) is TC; (B) is TFC.

21. (A) MC crosses ATC exactly at ATC's minimum (average-marginal rule).

22. (B) Diseconomies = rising LRATC at large scale (management/coordination costs). (A) is the short-run cousin — the classic confusion pair.

23. (C) Accounting profit = 300k − 210k = 90k. Implicit = 80k + 5%(100k) = 85k. Economic = 90k − 85k = $5,000.

24. (A) Profit = (14 − 11) × 200 = $600 > 0 → produce. AVC is irrelevant when profit is positive.

25. (D) Shutdown rule: P < minimum AVC → producing can't even cover variable costs.

26. (C) Losses → exit → supply left → price up → survivors at zero economic profit. The full chain.

27. (E) Allocative efficiency = P = MC: the value of the last unit equals its marginal cost. (A) is productive efficiency — also true in LR, but it's not what allocative means.

28. (C) The price cut applies to all units, dragging MR below price — the defining price-maker fact.

29. (D) Quantity from MR = MC; price read UP TO THE DEMAND CURVE: $15. Choosing $6 (A) is the classic error.

30. (A) Monopoly restricts output (Qm < Qc), raises price (Pm > Pc = MC), creating DWL.

MC scoring note: Answer distribution: A×4, B×7, C×8, D×6, E×5 — no letter-clustering.

Section II

FRQ 1 rubric (10 points)

(a) 3 pts: Market panel with D₁, S₁, P₁, Q₁ (1). Firm panel: horizontal MR₁ = D = AR at P₁'s height; MC and U-shaped ATC (1). q₁ at MR₁ = MC with ATC tangent (minimum ATC = P₁), consistent with long-run equilibrium (1).
(b) 1 pt: Zero economic profit (normal profit) — P₁ = ATC at q₁; the price line touches ATC's minimum, leaving no profit rectangle.
(c) 3 pts: (i) Market demand shifts right → P₂ > P₁, market quantity rises (1); firm's MR line rises to P₂ and q₂ > q₁ at the new MR = MC (1). (ii) Economic profit — P₂ > ATC(q₂); rectangle between P₂ and ATC (1).
(d) 2 pts: Profits attract entry → number of firms rises → market supply shifts right → price falls back toward minimum ATC (1); entry stops when the typical farm again earns zero economic profit (1).
(e) 1 pt: Yes — price returns to minimum ATC; producing at minimum ATC is productive efficiency.

FRQ 2 rubric (5 points)

(a) 2 pts: Correct S/D graph with equilibrium at ($10, 5,000) (1); ceiling drawn as a horizontal line at $7 below equilibrium with Qs = 3,500 and Qd = 6,500 marked (1).
(b) 1 pt: Shortage = 6,500 − 3,500 = 3,000 hours per day.
(c) 1 pt: Falls — from 5,000 to 3,500 (quantity supplied at $7); sellers, the short side, determine the quantity traded.
(d) 1 pt: The triangle between the demand and supply curves from 3,500 to 5,000 hours — rentals worth more to riders than they cost providers no longer occur, so that surplus vanishes for everyone.

Diagnostic map (route your review)

Missed	Review lesson
1–3	L1 (scarcity, opportunity cost, PPC)
4–5	L2 (comparative advantage)
6–8	L3 (supply & demand)
9–12	L4 (elasticity)
13–15	L5 (controls, taxes, surplus)
16–17	L6 (utility maximization)
18–22	L7–L8 (production & costs)
23	L8 (economic profit)
24–27	L9 (perfect competition)
28–30	L10 (monopoly — previewed; full treatment in Phase 4)

Post-mock ritual: for every miss, (1) name the error type (concept gap vs. misread vs. arithmetic), (2) redo it from scratch, (3) redraw the underlying graph from memory. A mock you don't autopsy is a mock wasted.

Score summary

Your running multiple-choice score appears in the bar below. Self-score the free-response section with the rubrics in the answer key, then use the diagnostic table to target review.

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