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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.
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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. Excess supply; exists at a market price when the quantity supplied exceeds the quantity demanded.






2. AVC = TVC/Q






3. 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






4. 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






5. The sum of consumer surplus and producer surplus






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






7. 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.






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






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






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






11. 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






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






13. 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






14. 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






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






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






17. A good for which higher income decreases demand






18. 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






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






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






21. Production of maximum output for a given level of technology and resources. All points on the PPF are productively efficient






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






23. Ed = 1






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






25. 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






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






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






28. 0 < Ei < 1






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






30. The lost net benefit to society caused by a movement away from the competitive market equilibrium






31. 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






32. Has opposite effect of an excise tax - as it lowers the marginal cost of production - forcing the supply curve down






33. The difference between your willingness to pay and the price you actually pay. It is the area below the demand curve and above the price






34. Ed > 1 - meaning consumers are price sensitive






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






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






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






38. 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






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






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






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






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






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






44. Demand for a resource like labor is derived from the demand for the goods produced by the resource






45. 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






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






47. 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






48. Ei = (%dQd good X)/(%d Income)






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






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