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AP Microeconomics
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Subjects
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economics
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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. The output where ATC is minimized and economic profit is zero
Break-even Point
Allocative Efficiency
Total variable costs (TVC)
Average Total Cost (ATC)
2. All firms maximize profit by producing where MR = MC
Price inelastic demand
Substitution Effect
Specialization
Profit Maximizing Rule
3. The study of how people - firms - and societies use their scarce productive resources to best satisfy their unlimited material wants.
Determinants of Demand
Opportunity Cost
Economics
Four-firm concentration ratio
4. 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 elastic
Dead Weight Loss
Normal Profit
Producer surplus
5. Factors of production - 4 categories: labor - physical capital - land/natural resources - and entrepreneurial ability
Law of Diminishing Marginal Utility
Average Fixed Cost (AFC)
Resources
Average Variable Cost (AVC)
6. 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
Scarcity
Average Variable Cost (AVC)
Constrained Utility Maximization
Monopoly long-run equilibrium
7. 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
Law of Supply
Cartel
Market power
Four-firm concentration ratio
8. 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
Excess Capacity
Price discrimination
Production function
Marginal tax rate
9. The change in quantity demanded resulting from a change in the price of one good relative to other goods
Income Elasticity
Substitution Effect
Cartel
Price Ceiling
10. The mechanism for combining production resources - with existing technology - into finished goods and services
Break-even Point
Determinants of Supply
Perfectly inelastic
Production function
11. A good for which higher income decreases demand
Diseconomies of Scale
Variable inputs
Inferior Goods
Shortage
12. The case where economies of scale are so extensive that it is less costly for one firm to supply the entire range of demand
Substitution Effect
Natural Monopoly
Demand for Labor
Law of Supply
13. Substitutes - cost as percentage of income - and time to adjust to price changes all influence price elasticity
Determinants of elasticity
Marginal Resource Cost (MRC)
Economies of Scale
Derived Demand
14. 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.
Marginal Revenue Product (MRP)
Opportunity Cost
Price inelastic demand
Economic Growth
15. 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
Perfectly inelastic
Market Economy (Capitalism)
Demand for Labor
Cross-Price Elasticity of Demand
16. The imbalance between limited productive resources and unlimited human wants
Scarcity
Positive externality
Constant cost industry
Consumer surplus
17. Occurs when LRAC is constant over a variety of plant sizes
Diseconomies of Scale
Constant Returns to Scale
Private goods
Price elasticity
18. Exists when the production of a good creates utility for third parties not directly involved in the consumption of production of the good
Economies of Scale
Four-firm concentration ratio
Positive externality
Law of Diminishing Marginal Utility
19. 0 < Ei < 1
Average Total Cost (ATC)
Necessity
Cartel
Fixed inputs
20. The change in total product resulting from a change in the labor input. MPL = dTPL/dL - or the slope of total product
Marginal tax rate
Scarcity
Marginal Product of Labor (MPL)
Surplus
21. 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
Negative externality
Long Run
Marginal tax rate
Price floor
22. An economic system based upon the fundamentals of private property - freedom - self-interest - and prices
Market Economy (Capitalism)
Economic Growth
Spillover benefits
Cartel
23. Es = (%dQs) / (%dPrice)
Price Elasticity of Supply
Cross-Price Elasticity of Demand
Inferior Goods
Price elasticity
24. Ed < 1
Surplus
Price inelastic demand
Determinants of Supply
Price elastic demand
25. The total quantity - or total output of a good produced at each quantity of labor employed
Normal Profit
Utility Maximizing Rule
Long Run
Total Product of Labor (TPL)
26. The number of units of any other good Y that must be sacrificed to acquire good X. Only relative prices matter
Economics
Relative Prices
Diseconomies of Scale
Average Variable Cost (AVC)
27. Ed = 1
Monopoly long-run equilibrium
Unit elastic demand
Four-firm concentration ratio
Variable inputs
28. Ei > 1
Perfectly competitive long-run equilibrium
Inferior Goods
Luxury
Spillover costs
29. Total product divided by labor employed. APL = TPL/L
Average Product of Labor (APL)
Scarcity
Perfect competition
Average Fixed Cost (AFC)
30. Ed = 8 - infinite change in demand to price change
Total Revenue Test
Perfectly elastic
Accounting Profit
Relative Prices
31. 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
Average Variable Cost (AVC)
Perfectly competitive long-run equilibrium
Marginal Resource Cost (MRC)
Price Ceiling
32. Costs that change with the level of output. If output is zero - so are TVCs.
Negative externality
Total variable costs (TVC)
Utility Maximizing Rule
Free-Rider Problem
33. A period of time long enough to alter the plant size. New firms can enter the industry and existing firms can liquidate and exit
Least-Cost Rule
Collusive oligopoly
Long Run
Relative Prices
34. Another way of saying that firms are earning zero economic profits or a fair rate of return on invested resources
Marginal tax rate
Normal Profit
Economics
Oligopoly
35. The sum of consumer surplus and producer surplus
Market Economy (Capitalism)
Determinants of Labor Demand
Total Welfare
Long Run
36. Ed = 0 - no response to price change
Price inelastic demand
Perfectly competitive long-run equilibrium
Perfectly inelastic
Variable inputs
37. 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
Productive Efficiency
Spillover benefits
Absolute prices
Determinants of Supply
38. Characterized by many small price-taking firms producing a standardized product in an industry in which there are no barriers to entry or exit
Determinants of Labor Demand
Price elastic demand
Perfect competition
Fixed inputs
39. A per unit tax on production results in a vertical shift in the supply curve by the amount of the tax
Law of Increasing Costs
Perfectly competitive long-run equilibrium
Excise Tax
Monopolistic competition
40. Pmc < MR = MC and Pmc > minimum ATC so outcome is not efficient - but profit = 0.
Marginal Resource Cost (MRC)
Economic Growth
Price floor
Monopolistic competition long-run equilibrium
41. Ed = (%dQd)/(%dP). Ignore negative sign
Accounting Profit
Comparative Advantage
Price elasticity
Explicit costs
42. 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
Total Fixed Costs (TFC)
Incidence of Tax
Spillover costs
Total Product of Labor (TPL)
43. The lost net benefit to society caused by a movement away from the competitive market equilibrium
Dead Weight Loss
Excess Capacity
Law of Demand
Law of Supply
44. Occurs when an economy's production possibilities increase. This can be a result of more resources - better resources - or improvements in technology.
Normal Goods
Economic Growth
Law of Increasing Costs
Price elasticity
45. Production inputs that cannot be changed in the short run. Usually this is the plant size or capital
Fixed inputs
Determinants of elasticity
Subsidy
Market Economy (Capitalism)
46. The most desirable alternative given up as the result of a decision
Marginal Revenue Product (MRP)
Opportunity Cost
Price inelastic demand
Break-even Point
47. Holding all else equal - when the price of a good rises - consumers decrease their quantity demanded for that good
Resources
Marginal Analysis
Law of Demand
Positive externality
48. Has opposite effect of an excise tax - as it lowers the marginal cost of production - forcing the supply curve down
Marginal Revenue Product (MRP)
Public goods
Production function
Subsidy
49. 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
Price elastic demand
Variable inputs
Substitution Effect
Least-Cost Rule
50. The difference between total revenue and total explicit costs
Consumer surplus
Marginal Resource Cost (MRC)
Accounting Profit
Excess Capacity
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