- ABC manufacturing produces widgets, a normal
good. Assuming that the widget market is
perfectly competitive, which of the following can
explain a decrease in the quantity and a decrease
in the price of widgets?
A. A decrease in the price of a substitute and a
decrease in the number of firms in the industry
B. An increase in the average income of
consumers and an increase in the price of a
major input
C. A decrease in the average income of
consumers and a decrease in the price of a
complement
D. An increase in the number of firms and an
increase in the price of a major input
E. An increase in the number of consumers and
an increase in the price of a major input - What is the best solution for reducing pollution in
a town where a chemical plant pollutes the air?
A. The government should pass regulation to
stop the pollution.
B. The town should pay the chemical plant to
reduce the pollution.
C. The chemical plant should reduce pollution
because it would be more beneficial for
society.
D. The town should lobby against air pollution.
E. The town cannot stop pollution so they
should not try. - Which of the following statements is true for an
inferior good?
A. An inferior good is a good that a consumer
buys more of when income increases.
B. An inferior good is a good that a consumer
buys more of when price increases.
C. An inferior good is a good that a consumer
buys less of when income increases.
D. An inferior good is a good that is not the best
in quality.
E. An inferior good is a good that demands a
lower price in the marketplace. - The elasticity of demand for coconuts is 0.6. If the
price of coconuts increases from $2 to $3, what
will the impact be on the coconut market?
A. The demand for coconuts will fall by 30%.
B. The demand for coconuts will increase
by 30%.
C. The demand for coconuts will fall by 83.3%.
D. The demand for coconuts will fall by 1.8%.
E. The demand for coconuts will increase by
1.8%. - A study of the tobacco industry revealed that a
10% increase in cigarette prices would cause a 5%
decrease in cigarette consumption. What is the
elasticity of demand for cigarettes?
A. 2
B. 0.5
C. 0.2
D. 5
E. 0.05
Part IV: AP Macroeconomics & Microeconomics Tests