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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. 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






2. 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






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






4. 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






5. A good for which higher income increases demand






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






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






8. Ei > 1






9. AVC = TVC/Q






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






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






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






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






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






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






16. 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






17. 0 < Ei < 1






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






19. A firm that has market power in the factor market (a wage-setter)






20. 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






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






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






24. 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






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






26. Factors of production - 4 categories: labor - physical capital - land/natural resources - and entrepreneurial ability






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






28. 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






29. Ed > 1 - meaning consumers are price sensitive






30. 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






31. 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.






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






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






34. The difference between total revenue and total explicit costs






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






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






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






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






39. 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






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






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






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






43. The study of how people - firms - and societies use their scarce productive resources to best satisfy their unlimited material wants.






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






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






46. 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.






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






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






49. The sum of consumer surplus and producer surplus






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