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AP Microeconomics

Subjects : economics, ap
  • Answer 50 questions in 15 minutes.
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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. Ei = (%dQd good X)/(%d Income)

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

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

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

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

6. Ed < 1

7. Ed = 0 - no response to price change

8. 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

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

10. 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

11. 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.

12. 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

13. 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

14. 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

15. 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

16. 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

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

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

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

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

21. Occurs when an economy's production possibilities increase. This can be a result of more resources - better resources - or improvements in technology.

22. 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

23. 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.

24. The sum of consumer surplus and producer surplus

25. 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

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

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

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

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

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

31. The difference between total revenue and total explicit costs

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

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

34. 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

35. Entry of new firms shifts the cost curves for all firms upward

36. 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

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

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

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

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

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

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

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

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

45. 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

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

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

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

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

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