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






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






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






4. 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






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






6. Models where firms agree to mutually improve their situation






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






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






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






10. The change in quantity demanded that results from a change in the consumer's purchasing power (or real income)






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






12. 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






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






14. 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






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






16. 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






17. 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






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






19. 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






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






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






22. A good for which higher income increases demand






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






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






25. A good for which higher income decreases demand






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






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






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






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






30. 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






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






32. 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






33. 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






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






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






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






37. Ed = 1






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






39. The difference between total revenue and total explicit costs






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






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






42. Ed > 1 - meaning consumers are price sensitive






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






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






45. AFC = TFC/Q






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






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






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






49. TR = P * Qd






50. A period of time too short to change the size of the plant - but many other - more variable resources can be changed to meet demand







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