AP Microeconomics Factor Markets and Market Failures

Question 1

In a perfectly competitive labor market, the wage rate is determined by:

Accepted Answer

The interaction of market supply and demand for labor

Answer

The firm’s marginal revenue product of labor

Answer

Government regulations

Answer

The firm’s average total cost

Question 2

A firm will hire additional units of a resource until:

Accepted Answer

Marginal revenue product equals the resource price

Answer

Marginal revenue equals marginal cost

Answer

Total revenue equals total cost

Answer

Marginal product of the resource is zero

Question 3

Which of the following is an example of a market failure?

Accepted Answer

The production of negative externalities, such as pollution

Answer

Perfect competition in the market for consumer goods

Answer

A decrease in the price of a substitute good

Answer

The elimination of economic profits in the long run

Question 4

Public goods are characterized by which two key features?

Accepted Answer

Non-excludability and non-rivalry

Answer

Excludability and rivalry

Answer

Excludability and non-rivalry

Answer

Non-excludability and rivalry

Question 5

To correct a negative externality, governments can:

Accepted Answer

Answer

Impose a tax equal to the external cost

Answer

Provide subsidies to the producers

Answer

Eliminate the production of the good

Answer

Set a price floor above the equilibrium price