6.6 Multiple Choice Questions

4 min readdecember 17, 2021

AP Microeconomics 🤑

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Multiple Choice Practice for Market Failure and the Role of Government

Welcome to Unit 6 AP Macroeconomics Multiple Choice Questions! Grab some paper and a pencil 📄 to record your answers as you go. You can see how you did on the Unit 6 Practice Questions Answers and Review sheet once you're done. Don't worry, we have tons of resources available if you get stumped 😕 on a question. And if solo study is not your thing, join a group in Hours!
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Facts about the test: The AP Microeconomics exam has 70 multiple choice questions and you will be given 1 hour to complete the section. That means it should take you around 8 minutes to complete 10 questions.
*The following questions were not written by College Board and, although they cover information outlined in the AP Microeconomics Course and Exam Description, the formatting on the exam may be different.
1. Of the following options, which is most likely to result in allocative efficiency?
A. an oligopoly
B. a perfectly price-discriminating monopoly
C. a perfectly competitive market with no externalities
D. a business producing where price = MC = ATC

2. Barji, a new technology company, has exclusive control over a key resource to produce new time travel machines. Barji's control over this resource would likely result in which of the following?
A. perfect competition, since Barji controls they key resource in produce time travel machines
B. no barriers to entering the time travel market
C. a high barrier to enter the time travel machine market, with Barji having a monopoly on time travel machines
D. a low barrier to enter the time travel market, with Barji having an oligopoly over the time travel market

3. If there was a positive externality, the government should
A. impose a quota
B. pay a subsidy equal to the marginal external benefit
C. pay the remainder of black market debts in the sector
D. increase government spending and taxes

4. Suppose there is a lot of pollution associated with producing good Z. An efficient policy to address this pollution issue would
A. discourage the production of good Z with a per-unit tax.
B. punish the free-riders of good Z.
C. make sure that the marginal social benefit of pollution reduction equals the marginal social cost of pollution reduction.
D. impose a proportional tax.

5. A third-party side effect is known as a(an)
A. externality
B. equilibrium
C. Nash equilibrium
D. profit reducing mechanism

6. On a graph, a negative externality would be shown if
A. marginal private cost (MPC) exceeds marginal social cost (MSC)
B. demand exceeds supply
C. too little output was produced at too low a price
D. marginal social cost (MSC) exceeds marginal private cost (MPC)

7. If the quantity of a good produced is not the same as the socially optimal quantity, there will be
A. deadweight loss
B. no equilibrium
C. both a positive and negative externality
D. fines imposed by the government

8. A per unit tax on pollution produced by firm A would reduce pollution and
A. reduce the output generated by firm A
B. increase the output generated by firm A
C. generate a surplus for firm A
D. generate a cap on employment for firm A

9. Which of the following is an example of a non-exclusionary public good?
A. Nike sneakers
B. private daycare for children
C. national defense
D. a Starbucks latte

10. Which of the following is an example of a shared-consumption (non-rival) good?
A. a private gyms basketball court
B. a country club golf course
C. a private pool club
D. a town public park

11. A law designed to prevent monopolies and encourage competition are known as
A. anti-retention laws 
B. anti-fiscal laws
C. antitrust laws
D. anti-equilibrium laws

12. A monopoly is inefficient because
A. it produces nothing that can benefit society
B. it produces too little and sets a price below MC
C. it produces too little and sets a price above MC
D. it produces too much and sets a price above MC

13. Like our current federal income tax system, these taxes take a larger percent of income from high income groups.
A. proportional taxes
B. regressive taxes
C. fixed taxes
D. progressive taxes

14. Which of the following is likely to reduce inequality in a nation's distribution of income?
A. job training for low-skilled workers
B. regressive taxes
C. increased defense spending
D. decreased trade deficit

15. The U.S. federal government redistributes income mainly by
A. progressive taxing of different income levels
B. regressive taxing of different income levels
C. no taxing of different income levels

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💸Unit 1 – Basic Economic Concepts
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🏋🏼‍♀️Unit 3 – Production, Cost, & the Perfect Competition Model
⛹🏼‍♀️Unit 4 – Imperfect Competition
💰Unit 5 – Factor Markets
🏛Unit 6 – Market Failure & the Role of Government
📝Exam Skills: FRQ/MCQ

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