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






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






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






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






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






6. 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






7. 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






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






9. 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






10. 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.






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






12. The difference between total revenue and total explicit costs






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






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






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






16. AFC = TFC/Q






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






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






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






20. A good for which higher income increases demand






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






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






23. Models where firms agree to mutually improve their situation






24. AVC = TVC/Q






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






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






27. Ed = 0 - no response to price change






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






29. 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






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






32. Product demand - productivity - prices of other resources - and complementary resources






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






34. Ed = 1






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






36. 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.






37. 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






38. MUx / Px = MUy/Py or MUx/MUy = Px/Py






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






40. 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






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






42. Ed > 1 - meaning consumers are price sensitive






43. 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






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






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






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






47. The sum of consumer surplus and producer surplus






48. 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






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






50. 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