5 Steps to a 5 AP Microeconomics, 2014-2015 Edition

Questions 7 to 9 refer to the graph below.

7. Assuming no government involvement in this
   market, if the current price were at the level of
   0A, we would expect

(A) a surplus in the market to be eliminated by

rising prices.

(B) a shortage in the market to be eliminated by

falling prices.

(C) a surplus in the market to be eliminated by

falling prices.

(D) a shortage in the market to be eliminated by

rising prices.

(E) a decrease in quantity supplied and an

increase in quantity demanded as the price

rises.

8. If the market is initially in equilibrium, which of
   the following would create a new equilibrium at
   point H?

(A) A decrease in consumer income if this good

is normal.

(B) An increase in the price of a substitute for

this good.

(C) A decrease in the cost of a production input

for this good.

(D) An increase in the number of consumers of

this good.

(E) An increase in consumer income if this good

is normal.

9. If the price were to rise from 0B to 0C,

(A) dollars spent on this good would increase if

demand for the good were price elastic.

(B) dollars spent on this good would decrease if

demand for the good were price inelastic.

(C) dollars spent on this good would increase if

demand for the good were price inelastic.

(D) dollars spent on this good would increase if

demand for the good were unitary price elastic.

(E) dollars spent on this good would decrease if

demand for the good were unitary price elastic.

10. Every day Melanie spends her lunch money con-
    suming apples, at $1 each, and oranges, at $2
    each. At her current level of consumption,
    Melanie’s marginal utility of apples is 12 and her
    marginal utility of oranges is 18. If she has
    already spent all of her lunch money, how should
    Melanie change her consumption decision to
    maximize utility?
    (A) She should make no changes; she is con-
    suming the utility maximizing combination
    of apples and oranges.
    (B) She should increase her apple consumption
    and decrease her orange consumption until
    the marginal utility per dollar is equal for
    both.
    (C) She should decrease her apple consumption
    and increase her orange consumption until
    the marginal utility per dollar is equal for
    both.
    (D) She should increase her apple consumption
    and decrease her orange consumption until
    the marginal utility is equal for both.
    (E) She should decrease her apple consumption
    and increase her orange consumption until
    the marginal utility is equal for both.


11. When the production or consumption of a
    good creates a positive externality, it is deemed
    a market failure because at the market quantity
    (A) the marginal social benefit exceeds the mar-
    ginal social cost.
    (B) the marginal social cost exceeds the mar-
    ginal social benefit.
    (C) society produces too much of the good.
    (D) the private benefits from consuming the
    good exceed the social benefits.
    (E) a surplus of the good always exists without
    government intervention.

170 › Step 5. Build Your Test-Taking Confidence

Quantity

Supply

Demand

Price

C

L

B

A

F

G

E

D

J

I

(^0) K
H
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