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AP Microeconomics

Subjects : economics, ap
Instructions:
  • Answer 50 questions in 15 minutes.
  • If you are not ready to take this test, you can study here.
  • 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. 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






2. 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






3. The sum of consumer surplus and producer surplus






4. 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






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






6. Goods that are both rival and excludable. Only one person can consume the good at a time and consumers who do not pay for the good are excluded from consumption






7. 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






8. Ed = 8 - infinite change in demand to price change






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






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






11. Models where firms agree to mutually improve their situation






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






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






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






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






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






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






18. 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






19. An economic system based upon the fundamentals of private property - freedom - self-interest - and prices






20. 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






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






22. 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.






23. Entry (or exit) of firms does not shift the cost curves of firms in the industry






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






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






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






27. Holding all else equal - when the price of a good rises - suppliers increase their quantity supplied for that good






28. Costs that change with the level of output. If output is zero - so are TVCs.






29. 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






30. 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






31. Ed > 1 - meaning consumers are price sensitive






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






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






34. 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






35. Ed = 0 - no response to price change






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






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






38. A good for which higher income increases demand






39. Ed < 1






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






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






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






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






44. The difference between your willingness to pay and the price you actually pay. It is the area below the demand curve and above the price






45. Exists when the production of a good imposes disutility upon third parties not directly involved in the consumption or production of the good






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






47. AVC = TVC/Q






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






49. A group of firms that agree not to compete with each other on the basis of price - production - or other competitive dimensions. Cartel members operate as a monopolist to maximize their joint profits






50. The output where ATC is minimized and economic profit is zero