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AP Microeconomics

Subjects : economics, ap
Instructions:
  • Answer 50 questions in 15 minutes.
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  • Match each statement with the correct term.
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This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. A market structure characterized by a few small firms producing a differentiated product with easy entry into the market






2. Costs that do not vary with changes in short-run output. They must be paid even when output is zero.






3. Costs of inputs - technology and productivity - taxes/subsidies - producer speculation - price of other goods that could be produced - and number of sellers all influence supply






4. Excess demand; a shortage exists at a market price when the quantity demanded exceeds the quantity supplied






5. Measures the value of what the next unit of a resource (e.g. - labor) brings to the firm. MRPL = MR x MPL. In a perfectly competitive product market - MRPL = P x MPL. In a monopoly product market - MR < P so MRPm < MRPc.






6. Characterized by many small price-taking firms producing a standardized product in an industry in which there are no barriers to entry or exit






7. The proportion of the tax paid by the consumers in the form of a higher price for the taxed good is greater if demand for the good is inelastic and supply is elastic






8. Exists if a producer can produce a good at lower opportunity cost than all other producers






9. Ei > 1






10. TR = P * Qd






11. Total revenue rises with a price increase if demand is price inelastic and falls with a price increase if demand is price elastic






12. Production inputs that cannot be changed in the short run. Usually this is the plant size or capital






13. Total product divided by labor employed. APL = TPL/L






14. The change in quantity demanded resulting from a change in the price of one good relative to other goods






15. When firms focus their resources on production of goods for which they have comparative advantage






16. The difference between the price received and the marginal cost of producing the good. It is the area above the supply curve and under the price






17. The lost net benefit to society caused by a movement away from the competitive market equilibrium






18. The number of units of any other good Y that must be sacrificed to acquire good X. Only relative prices matter






19. For one good - constrained by prices and income - a consumer stops consuming a good when the price paid for the next unit is equal to the marginal benefit received






20. A very diverse market structure characterized by a small number of interdependent large firms - producing a standardized or differentiated product in a market with a barrier to entry






21. The upward part of the LRAC curve where LRAC rises as plant size increases. This is usually the result of the increased difficulty of managing larger firms - which results in lost efficiency and rising per unit costs.






22. Exists at the point where the quantity supplied equals the quantity demanded






23. The change in quantity demanded that results from a change in the consumer's purchasing power (or real income)






24. The firm hires the profit maximizing amount of a resource at the point where MRP = MRC






25. Indirect - non-purchased - or opportunity costs of resources provided by the entrepreneur






26. MUx / Px = MUy/Py or MUx/MUy = Px/Py






27. Two goods are consumer substitutes if they provide essentially the same utility to consumers






28. Pmc < MR = MC and Pmc > minimum ATC so outcome is not efficient - but profit = 0.






29. The marginal utility from consumption of more and more of that item falls over time






30. Pm > MR = MC - which is not allocatively efficient and dead weight loss exists. Pm > ATC - which is not productively efficient. Profit > 0 so consumer surplus is transferred to the monopolist as profit






31. Ei = (%dQd good X)/(%d Income)






32. The rational decision maker chooses an action if MB = MC






33. The imbalance between limited productive resources and unlimited human wants






34. Another way of saying that firms are earning zero economic profits or a fair rate of return on invested resources






35. A per unit tax on production results in a vertical shift in the supply curve by the amount of the tax






36. A period of time long enough to alter the plant size. New firms can enter the industry and existing firms can liquidate and exit






37. Demand for a resource like labor is derived from the demand for the goods produced by the resource






38. A legal maximum price above which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent shortage






39. The difference between the monopolistic competition output Qmc and the output at minimum ATC. Excess capacity is underused plant and equipment






40. The downward part of the LRAC curve where LRAC falls as plan size increases. This is the result of specialization - lower cost of inputs - or other efficiencies of larger scale.






41. Exists if a producer can produce more of a good than all other producers






42. Ed = (%dQd)/(%dP). Ignore negative sign






43. The philosophy that a citizen should receive a share of economic resources proportional to the marginal revenue product of his or her productivity






44. Exists when the production of a good creates utility for third parties not directly involved in the consumption of production of the good






45. The mechanism for combining production resources - with existing technology - into finished goods and services






46. A good for which higher income decreases demand






47. Production inputs that the firm can adjust in the short run to meet changes in demand for their output. Often this is labor and/or raw materials






48. Measures the cost the firm incurs from using an additional unit of input. In a perfectly competitive labor market - MRC = Wage. In a monopsony labor market - the MRC > Wage






49. Direct - purchased - out-of-pocket costs paid to resource suppliers provided by the entrepreneur






50. The combination of labor and capital that minimizes total costs for a given production rate. Hire L and K so that MPL / PL = MPK / PK or MPL/MPK = PL/PK







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