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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. Ed = 0 - no response to price change






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






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






4. 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






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






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






7. Holding all else equal - when the price of a good rises - suppliers increase their quantity supplied for that good






8. 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






9. Exists when the production of a good creates utility for third parties not directly involved in the consumption of production of the good






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






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






12. 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






13. 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






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






15. 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






16. 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






17. 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






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






19. The sum of consumer surplus and producer surplus






20. Ed = 1






21. 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






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






23. 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






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






25. Ed > 1 - meaning consumers are price sensitive






26. 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.






27. 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






28. Costs that do not vary with changes in short-run output. They must be paid even when output is zero.






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






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






31. Exists if a producer can produce a good at lower opportunity cost than all other producers






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






33. A good for which higher income increases demand






34. The difference between total revenue and total explicit costs






35. 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.






36. AFC = TFC/Q






37. Total product divided by labor employed. APL = TPL/L






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






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






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






41. A market structure characterized by a few small firms producing a differentiated product with easy entry into the market






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






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






44. Models where firms agree to mutually improve their situation






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






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






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






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






49. 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






50. A firm that has market power in the factor market (a wage-setter)