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






2. 0 < Ei < 1






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






4. The more of a good that is produced - the greater the opportunity cost of producing the next unit of that good






5. Holding all else equal - when the price of a good rises - consumers decrease their quantity demanded for that good






6. Production of maximum output for a given level of technology and resources. All points on the PPF are productively efficient






7. The rate paid on the last dollar earned. This is found by taking the ratio of the change in taxes divided by the change in income






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






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






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






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






12. Substitutes - cost as percentage of income - and time to adjust to price changes all influence price elasticity






13. Occurs when there is no more incentive for firms to enter or exit. P=MR=MC=ATC and profit = 0






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






15. The case where economies of scale are so extensive that it is less costly for one firm to supply the entire range of demand






16. Production of the combination of goods and services that provides the most net benefit to society. The optimal quantity of a good is achieved when the MB = MC of the next unit and only occurs at one point on the PPF






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






18. 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






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






20. Labor demand for the firm is MRPL curve. The labor demanded for the entire market DL = ?MRPL of all firms






21. The most desirable alternative given up as the result of a decision






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






23. ATC = TC/Q = AFC + AVC






24. Goods that are both nonrival and nonexcludable. One person's consumption does not prevent another from also consuming that good and if it is provided to some - it is necessarily provided to all - even if they do not pay for that good






25. The difference between total revenue and total explicit and implicit costs






26. Models where firms are competitive rivals seeking to gain at the expense of their rivals






27. Has opposite effect of an excise tax - as it lowers the marginal cost of production - forcing the supply curve down






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






29. TR = P * Qd






30. Consumer income - prices of substitute and complementary goods - consumer tastes and preferences - consumer speculation - and number of buyers in the market all influence demand






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






32. 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






33. The practice of selling essentially the same good to different groups of consumers at different prices






34. The least competitive market structure - characterized by a single producer - with no close substitutes - barriers to entry - and price making power






35. Excess supply; exists at a market price when the quantity supplied exceeds the quantity demanded.






36. All firms maximize profit by producing where MR = MC






37. Ex -y = (%dQd good X) / (%d Price Y). If Ex -y > 0 - goods X and Y are substitutes. If Ex -y < 0 - goods X and Y are complementary






38. Ed > 1 - meaning consumers are price sensitive






39. 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






40. The change in total product resulting from a change in the labor input. MPL = dTPL/dL - or the slope of total product






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






42. 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






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. 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






45. 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






46. A period of time too short to change the size of the plant - but many other - more variable resources can be changed to meet demand






47. A market structure characterized by a few small firms producing a differentiated product with easy entry into the market






48. Additional costs to society not captured by the market supply curve from the production of a good - result in a price that is too low and a market quantity that is too high. Resources are overallocated to the production of this good






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






50. 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







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