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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.
  • Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.

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. Two goods are consumer complements if they provide more utility when consumed together than when consumed separately






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






3. Additional benefits to society not captured by the market demand curve from the production of a good - result in a price that is too high and a market quantity that is too low. Resources are underallocated to the production of this good






4. Models where firms agree to mutually improve their situation






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. Es = (%dQs) / (%dPrice)






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






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






9. Occurs when LRAC is constant over a variety of plant sizes






10. The ability to set the price above the perfectly competitive level






11. The price of a good measured in units of currency






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






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






14. The sum of consumer surplus and producer surplus






15. A measure of industry market power. Sum the market share of the four largest firms and a ratio above 40% is a good indicator of oligopoly






16. The output where AVC is minimized. If the price falls below this point - the firm chooses to shut down or produce zero units in the short run






17. 0 < Ei < 1






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






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






20. In the case of a public good - some members of the community know that they can consume the public good while others provide for it. This results in a lack of private funding and forces the government to provide it






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






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






23. 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






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






25. 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






26. 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






27. 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






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






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






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






31. A legal minimum price below which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent surplus






32. 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






33. 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






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






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






36. The additional cost incurred from the consumption of the next unit of a good or a service






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






38. Entry of new firms shifts the cost curves for all firms downward






39. 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






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






41. 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






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






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






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






45. The additional benefit received from the consumption of the next unit of a good or service






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






47. 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






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






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






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