AP Microeconomics
Exam Questions And
Correct Answers
(Verified Answers) Plus
Rationales 2025/2026
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1. Which of the following best defines opportunity cost?
A. The total cost of production
B. The value of the next best alternative foregone
C. The accounting cost of a decision
D. The sunk cost of a decision
Answer: B
Rationale: Opportunity cost is the value of the next best
alternative that is given up when a choice is made.
,2. A production possibilities curve (PPC) illustrates:
A. Inflation rates over time
B. Trade relationships between countries
C. Trade-offs between two goods under scarcity
D. Government spending levels
Answer: C
Rationale: The PPC shows the trade-offs and opportunity
costs of producing two goods under scarcity.
3. A shift of the demand curve to the right indicates:
A. A decrease in demand
B. An increase in supply
C. An increase in demand
D. A decrease in price only
Answer: C
Rationale: A rightward shift of demand means consumers are
willing and able to buy more at each price.
4. What happens when there is a surplus in the market?
A. Quantity demanded exceeds quantity supplied
B. Price rises above equilibrium
C. Quantity supplied exceeds quantity demanded
D. Demand increases automatically
Answer: C
Rationale: A surplus occurs when quantity supplied is greater
than quantity demanded.
,5. Which factor would shift the supply curve to the left?
A. Decrease in production costs
B. Increase in number of firms
C. Increase in taxes on producers
D. Technological improvement
Answer: C
Rationale: Higher taxes increase costs, reducing supply and
shifting it left.
6. Price elasticity of demand measures:
A. Responsiveness of quantity demanded to price changes
B. Total revenue of firms
C. Government price controls
D. Production efficiency
Answer: A
Rationale: Elasticity measures how sensitive quantity
demanded is to price changes.
7. If demand is inelastic, then a price increase will:
A. Decrease total revenue
B. Increase total revenue
C. Have no effect on revenue
D. Eliminate demand
, Answer: B
Rationale: With inelastic demand, quantity falls
proportionally less than price rises, increasing revenue.
8. Which market structure has many firms producing
identical products?
A. Monopoly
B. Oligopoly
C. Perfect competition
D. Monopolistic competition
Answer: C
Rationale: Perfect competition involves many firms and
identical products.
9. A monopoly is characterized by:
A. Many sellers and price-taking behavior
B. A single seller with barriers to entry
C. No barriers to entry
D. Many buyers and sellers
Answer: B
Rationale: A monopoly has one seller and significant barriers
preventing entry.
10. Marginal cost is defined as:
A. Total cost divided by quantity
B. Additional cost of producing one more unit
Exam Questions And
Correct Answers
(Verified Answers) Plus
Rationales 2025/2026
Q&A | Instant
Download Pdf
1. Which of the following best defines opportunity cost?
A. The total cost of production
B. The value of the next best alternative foregone
C. The accounting cost of a decision
D. The sunk cost of a decision
Answer: B
Rationale: Opportunity cost is the value of the next best
alternative that is given up when a choice is made.
,2. A production possibilities curve (PPC) illustrates:
A. Inflation rates over time
B. Trade relationships between countries
C. Trade-offs between two goods under scarcity
D. Government spending levels
Answer: C
Rationale: The PPC shows the trade-offs and opportunity
costs of producing two goods under scarcity.
3. A shift of the demand curve to the right indicates:
A. A decrease in demand
B. An increase in supply
C. An increase in demand
D. A decrease in price only
Answer: C
Rationale: A rightward shift of demand means consumers are
willing and able to buy more at each price.
4. What happens when there is a surplus in the market?
A. Quantity demanded exceeds quantity supplied
B. Price rises above equilibrium
C. Quantity supplied exceeds quantity demanded
D. Demand increases automatically
Answer: C
Rationale: A surplus occurs when quantity supplied is greater
than quantity demanded.
,5. Which factor would shift the supply curve to the left?
A. Decrease in production costs
B. Increase in number of firms
C. Increase in taxes on producers
D. Technological improvement
Answer: C
Rationale: Higher taxes increase costs, reducing supply and
shifting it left.
6. Price elasticity of demand measures:
A. Responsiveness of quantity demanded to price changes
B. Total revenue of firms
C. Government price controls
D. Production efficiency
Answer: A
Rationale: Elasticity measures how sensitive quantity
demanded is to price changes.
7. If demand is inelastic, then a price increase will:
A. Decrease total revenue
B. Increase total revenue
C. Have no effect on revenue
D. Eliminate demand
, Answer: B
Rationale: With inelastic demand, quantity falls
proportionally less than price rises, increasing revenue.
8. Which market structure has many firms producing
identical products?
A. Monopoly
B. Oligopoly
C. Perfect competition
D. Monopolistic competition
Answer: C
Rationale: Perfect competition involves many firms and
identical products.
9. A monopoly is characterized by:
A. Many sellers and price-taking behavior
B. A single seller with barriers to entry
C. No barriers to entry
D. Many buyers and sellers
Answer: B
Rationale: A monopoly has one seller and significant barriers
preventing entry.
10. Marginal cost is defined as:
A. Total cost divided by quantity
B. Additional cost of producing one more unit
