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Test your basic knowledge |
AP Microeconomics
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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 case where economies of scale are so extensive that it is less costly for one firm to supply the entire range of demand
Total Welfare
Natural Monopoly
Constant Returns to Scale
Dead Weight Loss
2. 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
Spillover costs
Substitution Effect
Monopoly long-run equilibrium
Monopoly
3. 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
Cartel
Utility Maximizing Rule
Price elastic demand
Market Equilibrium
4. Entry (or exit) of firms does not shift the cost curves of firms in the industry
Marginal Analysis
Total Revenue Test
Constant cost industry
Perfect competition
5. Production of maximum output for a given level of technology and resources. All points on the PPF are productively efficient
Average Fixed Cost (AFC)
Productive Efficiency
Substitution Effect
Price floor
6. The practice of selling essentially the same good to different groups of consumers at different prices
Price discrimination
Total Product of Labor (TPL)
Substitute Goods
Economies of Scale
7. Occurs when there is no more incentive for firms to enter or exit. P=MR=MC=ATC and profit = 0
Market Economy (Capitalism)
Average Variable Cost (AVC)
Variable inputs
Perfectly competitive long-run equilibrium
8. 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
Opportunity Cost
Determinants of Supply
Monopoly
Market Economy (Capitalism)
9. A period of time long enough to alter the plant size. New firms can enter the industry and existing firms can liquidate and exit
Long Run
Collusive oligopoly
Diseconomies of Scale
Scarcity
10. Ed = (%dQd)/(%dP). Ignore negative sign
Price elasticity
Market Equilibrium
Non-collusive oligopoly
Price discrimination
11. Indirect - non-purchased - or opportunity costs of resources provided by the entrepreneur
Implicit costs
Perfect competition
Variable inputs
Accounting Profit
12. Entry of new firms shifts the cost curves for all firms downward
Determinants of elasticity
Determinants of Labor Demand
Decreasing Cost industry
Marginal Cost (MC)
13. Total product divided by labor employed. APL = TPL/L
Natural Monopoly
Price inelastic demand
Determinants of Demand
Average Product of Labor (APL)
14. Ed = 0 - no response to price change
Total Welfare
Collusive oligopoly
Marginal Product of Labor (MPL)
Perfectly inelastic
15. Occurs when LRAC is constant over a variety of plant sizes
Total Welfare
Average Total Cost (ATC)
Constant Returns to Scale
Price Elasticity of Supply
16. The firm hires the profit maximizing amount of a resource at the point where MRP = MRC
Determinants of Labor Demand
Profit Maximizing Resource Employment
Normal Profit
Shortage
17. Consumer income - prices of substitute and complementary goods - consumer tastes and preferences - consumer speculation - and number of buyers in the market all influence demand
Determinants of Demand
Perfectly elastic
Monopoly long-run equilibrium
Natural Monopoly
18. A market structure characterized by a few small firms producing a differentiated product with easy entry into the market
Excise Tax
Excess Capacity
Demand for Labor
Monopolistic competition
19. Ei > 1
Price elasticity
Perfect competition
Luxury
Monopolistic competition
20. Ed = 8 - infinite change in demand to price change
Law of Increasing Costs
Profit Maximizing Rule
Perfectly elastic
Law of Diminishing Marginal Utility
21. 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
Determinants of Demand
Oligopoly
Market power
Spillover benefits
22. The difference between the price received and the marginal cost of producing the good. It is the area above the supply curve and under the price
Perfectly inelastic
Producer surplus
Marginal Resource Cost (MRC)
Substitution Effect
23. Direct - purchased - out-of-pocket costs paid to resource suppliers provided by the entrepreneur
Explicit costs
Unit elastic demand
Income Elasticity
Price Ceiling
24. Production inputs that cannot be changed in the short run. Usually this is the plant size or capital
Fixed inputs
Law of Increasing Costs
Four-firm concentration ratio
Constrained Utility Maximization
25. 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
Demand for Labor
Price floor
Monopoly
Average Product of Labor (APL)
26. 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.
Market Equilibrium
Economic Growth
Shortage
Economies of Scale
27. Entry of new firms shifts the cost curves for all firms upward
Increasing Cost Industry
Economic Profit
Market Equilibrium
Monopsonist
28. Total revenue rises with a price increase if demand is price inelastic and falls with a price increase if demand is price elastic
Perfectly inelastic
Implicit costs
Constant cost industry
Total Revenue Test
29. Exists when the production of a good creates utility for third parties not directly involved in the consumption of production of the good
Positive externality
Subsidy
Resources
Monopolistic competition long-run equilibrium
30. The rational decision maker chooses an action if MB = MC
Marginal Benefit (MB)
Determinants of elasticity
Oligopoly
Marginal Analysis
31. Exists when the production of a good imposes disutility upon third parties not directly involved in the consumption or production of the good
Absolute Advantage
Market Equilibrium
Consumer surplus
Negative externality
32. The number of units of any other good Y that must be sacrificed to acquire good X. Only relative prices matter
Marginal tax rate
Fixed inputs
Monopsonist
Relative Prices
33. The difference between total revenue and total explicit and implicit costs
Law of Diminishing Marginal Utility
Economic Profit
Marginal Resource Cost (MRC)
Shortage
34. The total quantity - or total output of a good produced at each quantity of labor employed
Variable inputs
Profit Maximizing Resource Employment
Average Total Cost (ATC)
Total Product of Labor (TPL)
35. 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
Least-Cost Rule
Normal Profit
Substitution Effect
Marginal Resource Cost (MRC)
36. Ed < 1
Consumer surplus
Price inelastic demand
Cross-Price Elasticity of Demand
Four-firm concentration ratio
37. A per unit tax on production results in a vertical shift in the supply curve by the amount of the tax
Oligopoly
Excise Tax
Economic Growth
Monopoly long-run equilibrium
38. 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
Scarcity
Normal Profit
Allocative Efficiency
Perfect competition
39. ATC = TC/Q = AFC + AVC
Public goods
Monopoly
Average Total Cost (ATC)
Explicit costs
40. Exists if a producer can produce a good at lower opportunity cost than all other producers
Productive Efficiency
Comparative Advantage
Normal Goods
Price floor
41. Demand for a resource like labor is derived from the demand for the goods produced by the resource
Derived Demand
Perfectly competitive long-run equilibrium
Average Product of Labor (APL)
Spillover costs
42. A firm that has market power in the factor market (a wage-setter)
Productive Efficiency
Monopsonist
Necessity
Excise Tax
43. 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
Long Run
Break-even Point
Determinants of elasticity
Least-Cost Rule
44. Costs that change with the level of output. If output is zero - so are TVCs.
Spillover benefits
Necessity
Total variable costs (TVC)
Inferior Goods
45. Exists if a producer can produce more of a good than all other producers
Absolute Advantage
Substitute Goods
Determinants of Labor Demand
Monopsonist
46. Ei = (%dQd good X)/(%d Income)
Public goods
Income Elasticity
Allocative Efficiency
Absolute prices
47. All firms maximize profit by producing where MR = MC
Perfectly inelastic
Producer surplus
Profit Maximizing Rule
Excess Capacity
48. 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
Public goods
Demand for Labor
Marginal Benefit (MB)
Productive Efficiency
49. The marginal utility from consumption of more and more of that item falls over time
Marginal Benefit (MB)
Law of Diminishing Marginal Utility
Relative Prices
Price elasticity
50. 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
Scarcity
Dead Weight Loss
Determinants of elasticity
Price Ceiling