AP®︎ Microeconomics: Unit 2 Practice Test
Prepare for your quiz, test, or the AP exam with focused practice questions on Unit 2 of AP Microeconomics – Supply and Demand.
Questions List
Unit 2 (All Topics)
Question 1 Topic 2.1Easy
This question tests the following: MKT-3.A.4
What does the demand curve represent?
What You’re Being Tested On:
Explore the learning objectives taken directly from the College Board’s AP® Microeconomics Curriculum. Ensure you’re prepared for the exact topics covered on the AP® exam, in-class tests, and quizzes, and gain confidence in your mastery of the material.
Unit 2: Supply and Demand
This unit examines how supply and demand interact in competitive markets to determine equilibrium price and quantity, along with elasticity and government interventions.
Topic 2.1: Demand
Learning Objective: MKT-3.B
Explain (using graphs as appropriate) buyers’ responses to changes in incentives and constraints.
Essential Knowledge: MKT-3.B.1
Changes in the determinants of consumer demand can cause the demand curve to shift.
Learning Objective: MKT-3.A
a. Define (using graphs as appropriate) key terms and factors related to consumer decision making and the law of demand. b. Explain (using graphs as appropriate) the relationship between price and quantity demanded and how buyers respond to incentives and constraints.
Essential Knowledge: MKT-3.A.1
A well-defined system of property rights is necessary for the market system to function well.
Essential Knowledge: MKT-3.A.2
Economic agents respond to incentives.
Essential Knowledge: MKT-3.A.3
Individuals often respond to incentives, such as those presented by prices, but also face constraints, such as income, time, and legal and regulatory frameworks.
Essential Knowledge: MKT-3.A.4
The law of demand suggests that a change in the own-price causes a change in quantity demanded in the opposite direction and a movement along a demand (marginal benefit) curve.
Essential Knowledge: MKT-3.A.5
The conceptual relationship between price and quantity stated by the law of demand leads to downward-sloping demand curves explained by the income effect and substitution effect and/or by diminishing marginal utility.
Essential Knowledge: MKT-3.A.6
The market demand curve (schedule) is derived from the summation of individual demand curves (schedules).
Topic 2.2: Supply
Learning Objective: MKT-3.C
a. Define (using graphs as appropriate) the law of supply. b. Explain (using graphs as appropriate) the relationship between price and quantity supplied.
Essential Knowledge: MKT-3.C.1
A change in own-price causes a change in quantity supplied in the same direction and a movement along a supply curve.
Essential Knowledge: MKT-3.C.2
The market supply curve (schedule) is derived from the summation of individual supply curves (schedules). The market supply curve is upward-sloping.
Learning Objective: MKT-3.D
Explain (using graphs as appropriate) producers’ (sellers’) responses to changes in incentives and technology.
Essential Knowledge: MKT-3.D.1
Changes in the determinants of supply can cause the supply curve to shift.
Topic 2.3: Price Elasticity of Demand
Learning Objective: MKT-3.E
a. Define measures of elasticity. b. Explain (using graphs where appropriate) measures of elasticity and the impact of a given price change on total revenue or total expenditure. c. Calculate (using data from a graph or a table as appropriate) measures of elasticity.
Essential Knowledge: MKT-3.E.1
Economists use the concept of elasticity to measure the magnitude of percentage changes in quantity owing to any given changes in the own-price, income, and prices of related goods.
Essential Knowledge: MKT-3.E.2
Price elasticity of demand is measured by the percentage change in quantity demanded divided by the percentage change in price or the responsiveness of the quantity demanded to changes in price. Elasticity varies along a linear demand curve, meaning slope is not elasticity.
Essential Knowledge: MKT-3.E.3
Ranges of values of elasticity of demand are described as elastic or inelastic with the separating benchmark being a magnitude of 1, where the change in the price and the change in the quantity demanded are proportional. a. When the magnitude of the value of elasticity is greater than 1, the demand is described as being elastic with respect to that price in the range of the given change. b. When the magnitude of the value of elasticity is less than 1, the demand is described as being inelastic with respect to that price in the range of the given change. c. When the magnitude of the value of elasticity is equal to 1, the demand is described as being unit elastic with respect to that price in the range of the given change.
Essential Knowledge: MKT-3.E.4
The price elasticity of demand depends on certain factors such as the availability of substitutes.
Essential Knowledge: MKT-3.E.5
The impact of a given price change on total revenue or total expenditure will depend on whether demand is elastic, inelastic, or unit elastic.
Topic 2.4: Price Elasticity of Supply
Learning Objective: MKT-3.E
a. Define measures of elasticity. b. Explain (using graphs where appropriate) measures of elasticity and the impact of a given price change on total revenue or total expenditure. c. Calculate (using data from a graph or a table as appropriate) measures of elasticity.
Essential Knowledge: MKT-3.E.6
Price elasticity of supply is measured by the percentage change in quantity supplied divided by the percentage change in price, or the responsiveness of the quantity supplied to changes in price.
Essential Knowledge: MKT-3.E.7
Ranges of values of elasticity of supply are described as elastic or inelastic with the separating benchmark being a magnitude of 1, where the change in the price and the change in the quantity supplied are proportional. a. When the magnitude of the value of elasticity is greater than 1, the supply is described as being elastic with respect to that price in the range of the given change. b. When the magnitude of the value of elasticity is less than 1, the supply is described as being inelastic with respect to that price in the range of the given change. c. When the magnitude of the value of elasticity is equal to 1, the supply is described as being unit elastic with respect to that price in the range of the given change.
Essential Knowledge: MKT-3.E.8
The price elasticity of supply depends on certain factors such as the price of alternative inputs.
Topic 2.5: Other Elasticities
Learning Objective: MKT-3.E
a. Define measures of elasticity. b. Explain (using graphs where appropriate) measures of elasticity and the impact of a given price change on total revenue or total expenditure. c. Calculate (using data from a graph or a table as appropriate) measures of elasticity.
Essential Knowledge: MKT-3.E.9
Elasticity can be measured for any determinant of demand or supply, not just the price.
Essential Knowledge: MKT-3.E.10
Income elasticity of demand is measured by the percentage change in the quantity demanded divided by the percentage change in consumers’ income. Economists use the income elasticity of demand to determine whether a good is normal or inferior.
Essential Knowledge: MKT-3.E.11
Cross-price elasticity of demand is measured by the percentage change in the quantity demanded of one good divided by the percentage change in the price of another good. Economists use the cross-price elasticity of demand to determine whether goods are substitutes, complements, or not related.
Topic 2.6: Market Equilibrium and Consumer and Producer Surplus
Learning Objective: MKT-4.A
a. Define (using graphs as appropriate) market equilibrium, consumer surplus, and producer surplus. b. Explain (using graphs as appropriate) how equilibrium price, quantity, consumer surplus, and producer surplus for a good or service are determined. c. Calculate (using data from a graph or table as appropriate) areas of consumer surplus and producer surplus at equilibrium.
Essential Knowledge: MKT-4.A.1
The supply-demand model is a tool for understanding what factors influence prices and quantities and why prices and quantities might differ across markets or change over time.
Essential Knowledge: MKT-4.A.2
In a perfectly competitive market, equilibrium is achieved (and markets clear with no shortages or surpluses) when the price of a good or service brings the quantity supplied and quantity demanded into balance, in the sense that buyers wish to purchase the same quantity that sellers wish to provide.
Essential Knowledge: MKT-4.A.3
Equilibrium price provides information to economic decision-makers to guide resource allocation.
Essential Knowledge: MKT-4.A.4
Economists use consumer surplus and producer surplus to measure the benefits markets create to buyers and sellers and understand market efficiency.
Essential Knowledge: MKT-4.A.5
Market equilibrium maximizes total economic surplus in the absence of market failures, meaning that perfectly competitive markets are efficient.
Topic 2.7: Market Disequilibrium and Changes in Equilibrium
Learning Objective: MKT-4.B
a. Define a surplus and shortage. b. Explain (using graphs where appropriate) how changes in underlying conditions and shocks to a competitive market can alter price, quantity, consumer surplus, and producer surplus. c. Calculate (using data from a graph or table as appropriate) changes in price, quantity, consumer surplus, and producer surplus in response to changes in market conditions or market disequilibrium.
Essential Knowledge: MKT-4.B.1
Whenever markets experience imbalances— creating disequilibrium prices and quantities, surpluses, and shortages—market forces drive price and quantity toward equilibrium.
Essential Knowledge: MKT-4.B.2
Factors that shift the market demand and market supply curves cause price, quantity, consumer surplus, producer surplus, and total economic surplus (within that market) to change. The impact of the change depends on the price elasticities of demand and supply.
Topic 2.8: The Effects of Government Intervention in Markets
Learning Objective: POL-1.A
a. Define forms of government price and quantity intervention. b. Explain (using graphs where appropriate) how government policies alter consumer and producer behaviors that influence incentives and therefore affect outcomes. c. Calculate (using data from a graph or table where appropriate) changes in market outcomes resulting from government policies.
Essential Knowledge: POL-1.A.1
Some government policies, such as price floors, price ceilings, and other forms of price and quantity regulation, affect incentives and outcomes in all market structures.
Essential Knowledge: POL-1.A.2
Governments use taxes and subsidies to change incentives in ways that influence consumer and producer behavior, shifting the supply and demand curves accordingly.
Essential Knowledge: POL-1.A.3
Taxes and subsidies affect government revenues or costs.
Essential Knowledge: POL-1.A.4
Government intervention in a market producing the efficient quantity through taxes, subsidies, price controls, or quantity controls can only decrease allocative efficiency.
Essential Knowledge: POL-1.A.5
Deadweight loss represents the losses to buyers and sellers as a result of government intervention in an efficient market.
Essential Knowledge: POL-1.A.6
The incidence of taxes and subsidies imposed on goods traded in perfectly competitive markets depends on the elasticity of supply and demand.
Topic 2.9: International Trade and Public Policy
Learning Objective: POL-1.B
a. Define tariffs and quotas. b. Explain (using graphs where appropriate) how markets are affected by public policy related to international trade. c. Calculate (using data from a graph or table as appropriate) changes in market outcomes resulting from public policy related to international trade.
Essential Knowledge: POL-1.B.1
Equilibria in competitive markets may be altered by the decision to open an economy to trade with other countries; equilibrium price can be higher or lower than under autarky, and the gap between domestic supply and demand is filled by trade. Opening an economy to trade with other countries affects consumer surplus, producer surplus, and total economic surplus.
Essential Knowledge: POL-1.B.2
Tariffs, which governments sometimes use to influence international trade, affect domestic price, quantity, government revenue, and consumer surplus and total economic surplus.
Essential Knowledge: POL-1.B.3
Quotas can be used to alter quantities produced and therefore affect price, consumer surplus, and total economic surplus. Exclusion: The graphing of quotas is beyond the scope of the course and the AP Exam, but understanding how quotas affect quantities produced is within the scope.
