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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. ATC = TC/Q = AFC + AVC






2. Consumer income - prices of substitute and complementary goods - consumer tastes and preferences - consumer speculation - and number of buyers in the market all influence demand






3. Another way of saying that firms are earning zero economic profits or a fair rate of return on invested resources






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






5. 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






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






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






8. 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.






9. The total quantity - or total output of a good produced at each quantity of labor employed






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






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






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






13. AFC = TFC/Q






14. 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






15. 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






16. 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






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






18. Models where firms agree to mutually improve their situation






19. 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






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






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






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






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






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






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






26. 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






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






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






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






30. Ed = 0 - no response to price change






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






32. 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






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






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






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






36. 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






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






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






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






40. The difference between total revenue and total explicit costs






41. Ed < 1






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






43. 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






44. 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






45. The least competitive market structure - characterized by a single producer - with no close substitutes - barriers to entry - and price making power






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






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






48. 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






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






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