--- title: "AP Microeconomics Unit 5 Practice Test" description: "A timed AP Microeconomics Unit 5 (Factor Markets) practice test in the AP format, drawn from 906 multiple-choice questions and 52 FRQs written for the unit. The standard version takes about 63 minutes." canonical: "https://fiveable.me/ap-micro/unit-test/5" type: "unit-test" subject: "AP Microeconomics" unit: "Unit 5" --- # AP Microeconomics Unit 5 Practice Test ## Overview A timed AP Microeconomics Unit 5 (Factor Markets) practice test in the AP format, drawn from 906 multiple-choice questions and 52 FRQs written for the unit. The standard version takes about 63 minutes. ## Test Format - 20 Multiple Choice Questions (23 minutes) - 1 FRQ – FRQ 1 – Long (20 minutes) - 1 FRQ – FRQ 2 – Short (20 minutes) ## Unit FRQs by Type - [FRQ 1 – Long](/ap-micro/frqs/long-frq?unit=5): 13 questions - [FRQ 2 – Short](/ap-micro/frqs/short-frq-2?unit=5): 23 questions - [FRQ 3 – Short](/ap-micro/frqs/short-frq-3?unit=5): 16 questions ## Practice Questions ### Question 1 Both perfectly competitive firms and monopsonists maximize profit by hiring labor where marginal revenue product (MRP) equals marginal resource cost (MRC). However, they differ in the wage paid relative to MRP. Which statement describes this difference? - (A) Competitive firms pay a wage equal to MRP; monopsonists pay a wage less than MRP. - (B) Competitive firms pay a wage less than MRP; monopsonists pay a wage equal to MRP. - (C) Competitive firms pay a wage equal to MRP; monopsonists pay a wage more than MRP. - (D) Competitive firms pay a wage more than MRP; monopsonists pay a wage less than MRP. - (E) Competitive firms pay a wage more than MRP; monopsonists pay a wage equal to MRP. **Answer: (A)** Comparing the relationship between wage and marginal revenue product reveals the exploitation inherent in monopsony. In perfect competition, the wage equals MRP because the firm is a wage taker; in monopsony, the firm exercises market power to pay a wage lower than the MRP. ### Question 2 In a perfectly competitive labor market, the firm perceives the labor supply curve as horizontal. In a monopsonistic market, the firm perceives the labor supply curve as upward-sloping. Which of the following describes the implication of this difference for the marginal resource cost (MRC)? - (A) For the competitive firm, MRC equals wage; for the monopsonist, MRC exceeds wage. - (B) For the competitive firm, MRC exceeds wage; for the monopsonist, MRC equals wage. - (C) For the competitive firm, MRC equals wage; for the monopsonist, MRC is below wage. - (D) For the competitive firm, MRC is below wage; for the monopsonist, MRC equals wage. - (E) For the competitive firm, MRC equals wage; for the monopsonist, MRC equals wage. **Answer: (A)** Connecting the supply curve shape to marginal costs explains the divergence. Because the monopsonist faces an upward-sloping supply curve, hiring an additional worker requires raising the wage for all existing workers, making the marginal cost higher than the wage itself. ### Question 3 The standard monopsony model assumes the firm pays a single uniform wage to all workers. If a monopsonist could instead perfectly wage discriminate, how would the marginal resource cost (MRC) curve change relative to the labor supply curve? - (A) The MRC curve would become identical to the labor supply curve. - (B) The MRC curve would shift higher above the labor supply curve. - (C) The MRC curve would become horizontal at the market wage rate. - (D) The MRC curve would shift downward below the labor supply curve. - (E) The MRC curve would shift upward above the labor supply curve. **Answer: (A)** Analyzing the effect of the single-wage assumption reveals why MRC typically diverges from supply. If a firm can pay each worker their exact reservation wage without raising wages for others, the marginal cost of the next worker is simply that worker's wage, making MRC and Supply identical. ### Question 4 A firm is the sole buyer of labor in a small town. It can hire 5 workers at a wage of $$10$$ per hour or 6 workers at a wage of $$12$$ per hour. What is the marginal factor cost of hiring the 6th worker? - (A) $$10$$ per hour - (B) $$12$$ per hour - (C) $$22$$ per hour - (D) $$72$$ per hour - (E) $$2$$ per hour **Answer: (C)** Calculating the change in total labor cost ($$6 \times 12 - 5 \times 10 = 72 - 50 = 22$$) reveals the marginal factor cost. ### Question 5 A monopsonist faces the following labor supply schedule: 10 workers at $$20$$, 11 workers at $$21$$, and 12 workers at $$22$$. The marginal revenue product of the 11th worker is $$33$$ and the 12th worker is $$29$$. How many workers should the firm hire to maximize profit? - (A) 10 workers - (B) 11 workers - (C) 12 workers - (D) 13 workers **Answer: (B)** Comparing MRP ($$33$$) to MFC ($$11 \times 21 - 10 \times 20 = 31$$) shows hiring is profitable, while the 12th worker's MRP ($$29$$) is less than their MFC ($$33$$). ### Question 6 A firm employs 20 workers at a wage of $$15$$ per hour. To hire a 21st worker, the firm must raise the wage to $$16$$ per hour for all employees. What is the marginal factor cost of the 21st worker? - (A) $$16$$ per hour - (B) $$20$$ per hour - (C) $$31$$ per hour - (D) $$36$$ per hour - (E) $$21$$ per hour **Answer: (D)** Calculating the change in total cost ($$21 \times 16 - 20 \times 15 = 336 - 300 = 36$$) yields the correct MFC. ### Question 7 In a monopsonistic labor market, the profit-maximizing quantity of labor is 50 units and the wage is $$12$$. If this market were perfectly competitive with the same supply and demand, how would the equilibrium quantity and wage compare? - (A) Quantity < 50, Wage < $$12$$ - (B) Quantity > 50, Wage > $$12$$ - (C) Quantity = 50, Wage = $$12$$ - (D) Quantity > 50, Wage < $$12$$ **Answer: (B)** Competitive markets equate supply and demand (MRP), resulting in higher employment and wages than monopsonies. ### Question 8 A firm finds that its marginal factor cost for the 10th worker is $$50$$, while the wage paid to that worker is $$30$$. What accounts for the $$20$$ difference between these two values? - (A) The cost of raising wages for all previous workers - (B) The diminishing marginal returns to labor inputs - (C) The marginal revenue product of the last worker - (D) The administrative cost of hiring new workers - (E) The worker's marginal revenue product exceeding the wage **Answer: (A)** The gap exists because hiring the marginal worker requires raising the wage for all infra-marginal workers. ### Question 9 A monopsonist hires 8 workers at a wage of $$10$$ each. To hire a 9th worker, the wage rises to $$11$$. What is the total hourly wage bill for 9 workers? - (A) $$11$$ - (B) $$88$$ - (C) $$90$$ - (D) $$99$$ **Answer: (D)** Calculating the total cost involves multiplying the new quantity by the new wage ($$9 \times 11 = 99$$). ### Question 10 A monopsonist hires 10 workers at a wage of $$15$$ per hour. The workers produce output that generates a total revenue of $$300$$ per hour. If labor is the only variable cost, what is the firm's hourly profit? - (A) $$150$$ - (B) $$285$$ - (C) $$300$$ - (D) $$450$$ - (E) $$50$$ **Answer: (A)** Profit is Total Revenue ($$300$$) minus Total Cost ($$10 \times 15 = 150$$), which equals $$150$$. ## Review the Unit - [5.1 Introduction to Factor Markets](/ap-micro/unit-5/intro-factor-markets/study-guide/pwArfJpGkiQNHkjkRJe8) - [5.2 Changes in Factor Demand and Factor Supply](/ap-micro/unit-5/changes-factor-demand-factor-supply/study-guide/0IIdcKCqjk97CeKAPC0V) - [5.3 Perfectly Competitive Labor Markets](/ap-micro/unit-5/profit-maximizing-behavior-perfectly-competitive-factor-markets/study-guide/eAu2TJS5gZwvjuZTlTF1) - [5.4 Monopsony Markets](/ap-micro/unit-5/monopsonistic-markets/study-guide/0xBQAaC4q2GeMFvurLsg) ## Other Unit Tests - [Unit 1: Basic Economic Concepts](/ap-micro/unit-test/1) - [Unit 2: Supply and Demand](/ap-micro/unit-test/2) - [Unit 3: Production, Cost, and the Perfect Competition Model](/ap-micro/unit-test/3) - [Unit 4: Imperfect Competition](/ap-micro/unit-test/4) - [Unit 6: Market Failure and the Role of Government](/ap-micro/unit-test/6) ## About This Document Canonical Fiveable pages are available as Markdown at the same path plus `.md`. - [llms.txt](https://fiveable.me/llms.txt): index of Fiveable's sections and URL patterns - [llms-full.txt](https://fiveable.me/llms-full.txt): complete subject and unit listing - [MCP server](https://fiveable.me/mcp): call Fiveable as tools instead of fetching pages (`https://fiveable.me/api/mcp`) - [MCP server for AP teachers](https://fiveable.me/mcp/teachers): a teacher's classes, assignments and AP-rubric grading (`https://fiveable.me/api/mcp/teacher`)