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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. In the case of a public good - some members of the community know that they can consume the public good while others provide for it. This results in a lack of private funding and forces the government to provide it






2. 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






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






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






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






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






7. 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






8. 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.






9. Entry (or exit) of firms does not shift the cost curves of firms in the industry






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






11. 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






12. 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






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






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






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






16. TR = P * Qd






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






18. 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






19. 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






20. 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.






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






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






23. 0 < Ei < 1






24. Total revenue rises with a price increase if demand is price inelastic and falls with a price increase if demand is price elastic






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






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






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






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






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






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






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






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






33. 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






34. Ed > 1 - meaning consumers are price sensitive






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






36. A good for which higher income decreases demand






37. 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






38. Goods that are both rival and excludable. Only one person can consume the good at a time and consumers who do not pay for the good are excluded from consumption






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






40. 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






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






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






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






44. The output where ATC is minimized and economic profit is zero






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






46. 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






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






48. Models where firms agree to mutually improve their situation






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






50. 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