AP Microeconomics Unit 3 practice questions
Try 10 multiple-choice questions from Unit 3 here. Pick an answer to see why it's right or wrong, then take the timed test above for a full AP-style set.
Question 1
A pizza parlor has a single oven that cannot be expanded. As the owner hires additional chefs, the number of extra pizzas produced by each new chef eventually begins to decline. This situation best illustrates which economic concept?
The law of diminishing marginal returns
The law of decreasing returns to scale
The law of diminishing marginal utility
The law of increasing opportunity costs
The law of increasing marginal returns
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Answer: (A)
Identifying the decline in additional output (marginal product) when a variable input (chefs) is added to a fixed input (oven) defines the law of diminishing marginal returns.
Question 2
A manufacturing firm can hire more workers and buy more raw materials immediately, but it cannot build a new factory or install heavy machinery for at least two years. The two-year period described is best classified as:
The short run production period
The long run production period
The market period when supply is completely fixed
The intermediate run production period
The variable input period
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Answer: (A)
Recognizing that at least one input (factory/machinery) remains fixed while others vary identifies the time horizon as the short run.
Question 3
A farmer observes that adding a 10th worker to a plot of land causes the total harvest to decrease from 500 bushels to 490 bushels because the workers are overcrowding the field. This situation illustrates:
Negative marginal returns
Decreasing returns to scale
Diminishing marginal utility
Constant returns to scale
Negative marginal utility
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Answer: (A)
Identifying that total product falls (and thus the change in output is negative) when an input is added defines negative marginal returns.
Question 4
A technology startup doubles its office space, server capacity, and workforce size. As a result, its total output of software services triples. This relationship between inputs and output is best identified as:
Increasing returns to scale
Constant returns to scale
Decreasing returns to scale
Diminishing marginal returns
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Answer: (A)
Recognizing that output increases by a larger percentage (triples) than the percentage increase in all inputs (doubles) identifies increasing returns to scale.
Question 5
A factory currently has an average product of labor equal to 50 units. If the firm hires one additional worker whose marginal product is 40 units, which outcome will occur?
The average product will decrease
The average product will increase
The total product will decrease
The marginal product will increase
The marginal product will remain constant
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Answer: (A)
Applying the mathematical relationship between marginal and average values reveals that adding a value (40) lower than the current average (50) pulls the average down.
Question 6
A bakery operates with a lease on its building that cannot be changed for 12 months, but it can hire or fire bakers daily. In this context, the building lease represents:
A fixed input
A variable input
A marginal input
A sunk cost input
An implicit cost
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Answer: (A)
Defining an input that cannot be adjusted within a specific timeframe identifies it as a fixed input, a key feature of short-run production.
Question 7
A firm continues to hire workers until the marginal product of the last worker added is exactly zero. At this specific level of employment, which of the following is true?
Total product is maximized
Average product is maximized
Marginal cost is minimized
The firm is operating at profit-maximizing employment
Marginal product equals average product
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Answer: (A)
Recognizing the mathematical relationship between marginal and total values confirms that when the rate of change (marginal product) is zero, the total value is at its peak.
Question 8
When a small sandwich shop hires a second worker, the two employees split tasks so that one slices meat while the other assembles sandwiches. Output more than doubles compared to when one worker did everything. This illustrates:
Increasing marginal returns
Decreasing returns to scale
Diminishing marginal returns
Constant returns to scale
Constant marginal returns
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Answer: (A)
Identifying that the additional output from the second worker exceeds the output of the first worker due to specialization defines increasing marginal returns.
Question 9
A large corporation increases all of its inputs—labor, capital, and land—by 50%. However, due to communication breakdowns and management inefficiencies, total output increases by only 40%. This outcome illustrates:
Decreasing returns to scale
Diminishing marginal returns
Negative marginal returns
Increasing returns to scale
Constant returns to scale
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Answer: (A)
Recognizing that output growth (40%) is less than the proportional growth of all inputs (50%) identifies the phenomenon as decreasing returns to scale.
Question 10
A data entry firm processes 1,000 records per day using 20 employees. The calculation of 50 records per employee represents which economic measure?
The average product of labor
The marginal product of labor
The total product of labor
The marginal revenue product
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Answer: (A)
Calculating the ratio of total output (1,000 records) to the total number of input units (20 employees) defines the average product of labor.
What's on the AP Microeconomics Unit 3 practice test
The standard version takes about 63 minutes and follows the timing and directions of the AP exam, sized to one unit:
- 20 Multiple Choice Questions (23 minutes)
- 1 FRQ – FRQ 1 – Long (20 minutes)
- 1 FRQ – FRQ 2 – Short (20 minutes)
Questions are drawn from 1562 multiple-choice questions and 47 FRQs written for Unit 3, Production, Cost, and the Perfect Competition Model.
Practice AP Microeconomics Unit 3 FRQs
Answer the unit's free-response questions one at a time and get a score on every part.
- FRQ 1 – Long (16 questions)
- FRQ 2 – Short (13 questions)
- FRQ 3 – Short (18 questions)
Review Unit 3 before you start
- 3.1 The Production Function
- 3.2 Short-Run Production Costs
- 3.3 Long-Run Production Costs
- 3.4 Types of Profit
- 3.5 Profit Maximization
- 3.6 Firms' Short-Run Decisions to Produce and Long-Run Decisions to Enter or Exit a Market
- 3.7 Perfect Competition