AP®︎ Microeconomics: Topic 5.3 Practice Test
Prepare for your quiz, test, or the AP exam with focused practice questions on Topic 5.3 of AP Microeconomics – Profit-Maximizing Behavior in Perfectly Competitive Factor Markets.
Questions List
Topic 5.3
Question 1 Easy
This question tests the following: PRD-4.C.1
What is the primary characteristic of a perfectly competitive labor market?
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.
Topic 5.3: Profit-Maximizing Behavior in Perfectly Competitive Factor Markets
Learning Objective: PRD-4.C
a. Define (using graphs as appropriate) the characteristics of perfectly competitive factor markets. b. Explain (using graphs where appropriate) the profit-maximizing behavior of firms buying labor (with other inputs fixed) in perfectly competitive markets. c. Calculate (using data from a graph or table where appropriate) measures representing the profit-maximizing behavior of firms buying labor (with other inputs fixed) in perfectly competitive markets.
Essential Knowledge: PRD-4.C.4
Marginal revenue product of a factor of production is the change in total revenue divided by the change in that factor of production, which is also equal to the marginal physical product of that factor multiplied by the marginal revenue ( MRP = MP × MR ). Firms in a perfectly competitive output market will have marginal revenue product of labor that is equal to the value of the marginal product of labor ( VMPL = MPL × P ) because marginal revenue for each unit of output is equal to price.
Essential Knowledge: PRD-4.C.1
In a perfectly competitive labor market, the wage is set by the market and each firm hires the quantity of workers, where the marginal factor (resource) cost (wage) equals the marginal revenue product of labor. A typical firm may be a perfect competitor in the labor market even if it is an imperfect competitor in its output markets.
Essential Knowledge: PRD-4.C.2
A typical firm hires labor in a perfectly competitive labor market as long as the marginal revenue product of labor is greater than the market wage.
Essential Knowledge: PRD-4.C.3
To minimize costs or maximize profits, firms allocate inputs such that the last dollar spent on each input yields the same amount of marginal product.
