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TERMS OF USE
Introduction
Diagnostic Quiz
Questions 1–20
Questions 21–84
Questions 85–187
Question 188–276
Question 277–354
Questions 355–439
Chapter 6 Market Failure and the Role of
Government
Questions 440–500
Answers
INTRODUCTION
You might be the kind of student who takes several AP courses and
needs to study extra questions a few weeks before the exam for a final
review. Or you might be the kind of student who puts off preparing until the
last weeks before the exam. No matter what your preparation style is, you
will surely benefit from reviewing these 500 questions, which closely
parallel the content, format, and degree of difficulty of the questions on the
actual AP exam. These questions and their answer explanations are the
ideal last-minute study tool for those final few weeks before the test.
Good luck!
DIAGNOSTIC QUIZ QUESTIONS
(A) The opportunity cost is $32 per hour because that is the
total value of the two jobs James could have done.
(C) The opportunity cost is $14 per hour because this is the
minimal amount of income that James could have earned.
(A) $100,000
(B) $200,000
(C) $350,000
(D) $400,000
(E) $500,000
(E) These are the only market structures where the law of
diminishing returns can be applied.
13. The following table lists the quantity of cars presented and the
price of cars in five different market types. Which of the following
would MOST likely be the price and quantity if the market were a
monopoly?
(A) It would be market A because monopolists tend to
produce a large quality and sell at high prices.
(E) scarcity
(C) It means that the inflation rate is very low because the
value of the Gini coefficient is smaller than 1.
20. The amount of taxes Jane has had to pay in the past five years
is shown in the following table, along with her annual revenue.
Assume that Jane had the same costs every year. This demonstrates a
10. (Unit: Production, Cost, and the Perfect Competition Model. See
Chapter 3 for similar questions.)
ANSWER: (B) If Florida loses roughly $50,000,000 every year,
placing a tax on alcoholic drinks would be a way for society to offset
economic costs.
ANSWER: (C) Companies are price takers in such a market, and the
level of output produced where companies can earn a profit is where
marginal revenue equals marginal costs.
ANSWER: (C) Despite the fact that subsidies will lower the price of
the product, these subsidies paid by the government are still something
financed by taxpayers. For this reason, it is still theoretically possible that
despite the decreasing prices, there is a net loss in societal welfare.
17. (Unit: Market Failure and the Role of Government. See Chapter 6
for similar questions.)
ANSWER: (C) The problem of people not paying for a public good is
called the free rider problem or free-rider dilemma.
18. (Unit: Market Failure and the Role of Government. See Chapter 6
for similar questions.)
19. (Unit: Market Failure and the Role of Government. See Chapter 6
for similar questions.)
20. (Unit: Market Failure and the Role of Government. See Chapter 6
for similar questions.)
21. Deirdre has one free hour to practice the piano for an
upcoming school concert or work at the library for $7 per hour or
babysit her neighbor’s 12-year-old son for $10 per hour. She chooses
to practice the piano. What is the opportunity cost of practicing the
piano?
(A) The opportunity cost would be $17 because she chose not
to participate in these activities.
(B) The marginal cost of the additional hour is less than the
marginal benefit of the additional hour.
(C) Both the marginal benefit and marginal cost are always
equal in this scenario.
(D) The marginal benefit of the second hour is less than the
marginal benefit of the additional hour.
(E) The marginal cost of the second hour is greater than the
marginal cost of the additional hour.
(E) MB = MC
27. Richard and Michele have to mow their lawn and walk their
dog on Sunday morning. It takes Richard one hour to either mow the
lawn or walk the dog. Michele can also walk the dog in one hour, but
she needs two hours to mow the lawn. What should Richard and
Michele do?
(A) Michele should walk the dog because she has absolute
advantage in mowing the lawn.
(C) The opportunity cost is 500 hot dogs because this is the
increase in hot dog production.
(D) The opportunity cost is 1,000 hot dogs because this is the
amount of hot dogs produced.
(E) The prices of hot dogs and hamburgers are necessary to
calculate opportunity cost in this example.
(A) when the price of a good rises, the quantity does not fall
(C) one obtains more of a good, the marginal utility (the value
from one more unit) will decrease
32. Suppose both Spain and Germany produce soccer balls and
golf balls. Spain can produce soccer balls at a lower opportunity cost
than Germany. Germany can produce golf balls at a lower opportunity
cost than Spain. According to the law of comparative advantage,
33. Which of the following would occur if the United States has a
significant surge in immigration?
(A) The production possibilities curve would shift to the left.
(B) the cost of building the performing arts center now rather
than waiting until next year
(B) the additional cost from the consumption of the next unit
of a good or service
39. The number of items that Italy and France can produce in a
day is indicated in the following table. Using the theory of
comparative advantage, what would be the most likely outcome?
(A) point A
(B) point B
(C) point C
(D) point D
(E) point E
(B) solar power costing more per watt than coal power
La Asunción, 55, 70
La Ceiba, 35, 81, 85, 98
La Columna Mt., 59
La Chacarilla, 235
La Dorada, 33, 34, 37, 38
La Goajira, 10, 18
La Guaira, 63, 67, 77, 80, 83
La Guayra Falls, 289, 306, 333, 343, 385, 393
Laguna, 406
Laguneta, 62
La Hacha, 81
La Limeña, 165
Lambayeque, 152, 164, 187, 189
La Merced, 178
La Pampa, 283, 288, 299, 303, 310, 319
La Paz, 181, 184, 206, 207, 209, 210, 213, 214, 217, 221, 222,
223, 224, 225, 226, 230, 231, 233, 234, 236, 237, 242, 243,
248, 311, 457
La Plata, 283, 285, 302, 309, 312, 318, 329
La Plata R., 210, 211, 212, 281, 289, 301, 302, 306, 354, 360,
364, 379, 385;
Isl., 144
La Quiaca, 184, 223, 235, 292, 309, 312
Lara, 55, 63, 66, 88, 93
La Rioja, 283, 295, 321, 322, 325
La Serena, 247, 248, 256, 265
Latacunga, 117, 125, 137, 139
Lavalleja General, 355
La Vela, 65, 79, 81
La Victoria, 67, 80
Lead, 144, 194, 195, 235, 274, 432
Lebrija R., 34, 35
León, 116, 117, 133
Leopoldina, 407, 411
Leticia, 154
Libertad, 152, 164, 188, 189
Lima, 8, 115, 149, 150, 152, 153, 154, 160, 162, 167, 176, 179,
183, 187, 190, 203, 206, 455, 457
Linares, 247, 258
Linseed, 320
Lipez, 234;
Serranía de, 211
Live stock, 44, 91, 108, 143, 193, 239, 240, 277, 315, 350, 368,
424
Loa R., 256, 268
Lobitos, 144, 201
Lobos Isls., 164, 201
Lobos, Punta de, 275
Loja, 116, 117, 123, 124, 132, 139, 144, 145, 184
Lomas, 168
Lopez, Carlos Antonio, 334;
Francisco, 334, 335
Loreto, 152, 173, 179
Lorica, 22
Los Andes, (Chile), 254, 268, 269;
(Arg.), 283, 291, 293
Los Angeles, 247
Los Patos Pass, 257
Los Rios, 116, 117, 132
Lota, 263, 264, 274, 275
Luque, 342;
Hernando de, 147
Lurín, 183
Llallagua, 233
Llamas, 143, 193, 225, 239
Llanos, 16, 27, 59, 60, 62, 70, 71, 91, 123, 211
Llanquihue, 247, 259, 277;
Lake, 252
Macami, 110
Macas, 139, 145
Maceió, 375, 399, 417
Macora, 146
Machacamarca, 224
Machachi V., 137
Machala, 117, 132, 139
Machalilla, 136
Madeira R., 160, 243, 383, 384, 403, 406, 412, 413
Madeira-Mamoré Ry., 183, 225, 227, 228, 243, 383, 412
Madera R., 212
Madidi R., 212, 227, 237, 241
Madre de Dios, 152, 173, 199;
R., 159, 172, 183, 192, 212, 219, 227, 238, 241, 383
Magallanes, 246, 247, 260, 275, 278
Magangué, 34
Magdalena, 9, 10, 21;
R., 16, 17, 18, 22, 32-35, 37, 38
Magellan Strait, 251
Mahogany, 90
Maipo R., 246
Maipures Rapids, 17, 75
Maize, see Corn
Majes R., 168, 180
Mal Abrigo, 366
Malabrigo, 165
Maldonado, (Peru), 152;
(Urug.), 356, 363, 367, 370
Malleco, 247, 259;
R., 264
Mamoré R., 160, 211, 212, 219, 227, 383, 412, 413
Manabí, 116, 117, 131, 142, 144, 146
Manaos, 26, 43, 179, 375, 378, 403, 406, 413
Mandioca, 142, 349, 400, 419
Manganese, 145, 325, 352, 370, 428
Manglar Alto, 136, 146
Mangrove, 90
Manizales, 10, 23, 35
Manta, 131, 136, 144;
Bay, 131
Mantaro R., 159, 170, 171
Mantiqueiro, Serra de, 385, 428
Manufactures, 51, 52, 98, 202, 203, 278, 327-329, 352, 371, 426,
427
Manzanares R., 79
Mapocho R., 254
Mar, Serra do, 1, 380, 381, 385, 388
Maracaibo, 41, 55, 57, 64, 78, 82, 83, 84, 91, 94, 98
Maracaibo Channel, 78, 96;
Lake, 16, 31, 36, 46, 48, 53, 59, 61, 62, 64, 78, 82, 84, 87, 94,
95, 96
Maracajú, Serra de, 385
Maracay, 55, 57, 67, 79, 80, 83, 87, 92, 98
Marajós Isl., 382, 406
Maranhão, 375, 377, 401, 406, 415, 418, 430
Marañón R., 119, 124, 125, 138, 159, 170, 182, 192
Mar del Plata, 302, 309, 326, 330
Margarita Isl., 69, 70, 79, 98
Mariquita, 35
Maroni R., 109, 113
Marowijne R., 111, 112, 113
Martinez, 317
Martinique Isl., 112
Matahuasi, 183
Matarani, 168
Matto Grosso, 289, 339, 348, 375, 383, 386, 403, 413, 415, 422,
424, 425, 426, 428, 429
Matucana, 178
Maturín, 55, 70
Mauá, 407, 411
Maués, 406
Maule, 247, 258;
R., 252
Medellín, 10, 12, 13, 19, 23, 35, 37, 38, 51
Medicinal Plants, 44
Meiggs, Henry, 165, 177, 179, 196
Mejillones, 256, 266, 267
Melo, 356, 363, 366
Mendoza, 269, 281, 283, 288, 296, 297, 303, 309, 310, 320, 322,
323, 325, 326, 329;
Pedro de, 281, 333
Mene Grande, 95, 96
Mercedario Mt., 251
Mercedes, 356, 361, 365, 366
Mérida, 55, 57, 72, 81, 84, 93, 98
Mesopotamia, 288, 290, 317
Mestizos, 209
Meta, 10, 26;
R., 17, 27, 61, 62, 65, 84
Minas, 356, 364, 370
Minas Geraes, 375, 381, 388, 404, 414, 418, 424, 425, 426, 428,
429, 430, 432
Mining-Minerals, 45-50, 52, 92-97, 107, 108, 111, 112, 144, 145;
194-202, 229-238, 270-275, 324-326, 352, 370, 427-433
Miranda, 54, 55, 66, 68, 79, 80
Mirím Lake, 354, 359, 363, 386, 387, 407
Misiones, 283, 287, 293, 311, 313, 321, 322, 324, 328, 331, 422;
Sierra de, 211
Mocoa, 10, 26, 38
Mojos Plains, 384
Molybdenum, 201
Mollendo, 161, 168, 175, 179, 192, 221, 222, 243, 261
Monagas, 54, 55, 70, 82
Monazite, 398
Monday R., 339
Montaña, 153, 154, 156, 159, 161, 172, 174, 178, 181, 188, 210
Montecristi, 131, 146
Monteria, 22, 38
Montevideo, 354, 355, 356, 357, 360, 364, 365, 366, 367, 370,
371, 392, 404, 410
Moquegua, 152, 169, 255
Moriche Palm, 91
Morococha, 177, 195, 196, 200, 224
Morona R., 124, 125
Moropán, 163
Morrisquillo Bay, 44
Motatán, 72, 81, 84, 85
Moyabamba, 152