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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. 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






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






3. 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.






4. Models where firms agree to mutually improve their situation






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






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






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






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






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






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






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






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






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






14. Ei > 1






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






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






17. 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






18. 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






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






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. 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.






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






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






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






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






26. 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






27. 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






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






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






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






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






32. 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






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






34. 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






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






36. 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






37. 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






38. 0 < Ei < 1






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






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






41. 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






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






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






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






45. The sum of consumer surplus and producer surplus






46. 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.






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






48. A good for which higher income decreases demand






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






50. 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