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AP Microeconomics

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 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






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






3. A good for which higher income increases demand






4. 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






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






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






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






8. The rational decision maker chooses an action if MB = MC






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






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






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






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






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






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






15. 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






16. 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






17. 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






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






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






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






21. Ed = 0 - no response to price change






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






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






24. 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






25. The proportion of the tax paid by the consumers in the form of a higher price for the taxed good is greater if demand for the good is inelastic and supply is 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. Ed > 1 - meaning consumers are price sensitive






28. 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






29. A good for which higher income decreases demand






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






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






32. 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






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






34. 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






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






36. 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






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






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






39. 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






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






41. Direct - purchased - out-of-pocket costs paid to resource suppliers provided by the entrepreneur






42. 0 < Ei < 1






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






44. 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






45. Exists if a producer can produce more of a good than all other producers






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






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






48. The sum of consumer surplus and producer surplus






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






50. The upward part of the LRAC curve where LRAC rises as plant size increases. This is usually the result of the increased difficulty of managing larger firms - which results in lost efficiency and rising per unit costs.