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Test your basic knowledge |
AP Microeconomics
Start Test
Study First
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
Perfectly inelastic
Income Elasticity
Normal Profit
Derived Demand
2. The mechanism for combining production resources - with existing technology - into finished goods and services
Private goods
Total Fixed Costs (TFC)
Production function
Variable inputs
3. A per unit tax on production results in a vertical shift in the supply curve by the amount of the tax
Comparative Advantage
Average Product of Labor (APL)
Profit Maximizing Resource Employment
Excise 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
Unit elastic demand
Public goods
Price floor
Increasing Cost Industry
5. Excess demand; a shortage exists at a market price when the quantity demanded exceeds the quantity supplied
Shortage
Perfectly elastic
Economics
Constant cost industry
6. Excess supply; exists at a market price when the quantity supplied exceeds the quantity demanded.
Least-Cost Rule
Price floor
Surplus
Inferior Goods
7. Holding all else equal - when the price of a good rises - suppliers increase their quantity supplied for that good
Income Effect
Shutdown Point
Opportunity Cost
Law of Supply
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
Monopoly long-run equilibrium
Profit Maximizing Resource Employment
Marginal Resource Cost (MRC)
Income Elasticity
9. Exists when the production of a good creates utility for third parties not directly involved in the consumption of production of the good
Total Revenue
Total variable costs (TVC)
Positive externality
Perfectly inelastic
10. Pmc < MR = MC and Pmc > minimum ATC so outcome is not efficient - but profit = 0.
Determinants of Demand
Total Product of Labor (TPL)
Marginal Analysis
Monopolistic competition long-run equilibrium
11. The additional cost incurred from the consumption of the next unit of a good or a service
Increasing Cost Industry
Dead Weight Loss
Marginal Cost (MC)
Four-firm concentration ratio
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
Collusive oligopoly
Variable inputs
Public goods
Spillover benefits
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
Necessity
Excess Capacity
Oligopoly
Marginal Analysis
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
Positive externality
Luxury
Producer surplus
Perfect competition
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
Excess Capacity
Average Product of Labor (APL)
Incidence of Tax
Marginal Benefit (MB)
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
Four-firm concentration ratio
Total Welfare
Monopoly
Utility Maximizing Rule
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
Free-Rider Problem
Spillover benefits
Productive Efficiency
Normal Profit
18. Occurs when there is no more incentive for firms to enter or exit. P=MR=MC=ATC and profit = 0
Monopoly
Marginal Product of Labor (MPL)
Constrained Utility Maximization
Perfectly competitive long-run equilibrium
19. The sum of consumer surplus and producer surplus
Dead Weight Loss
Subsidy
Natural Monopoly
Total Welfare
20. Ed = 1
Economic Profit
Unit elastic demand
Derived Demand
Economic Growth
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
Market Economy (Capitalism)
Absolute prices
Law of Increasing Costs
Cross-Price Elasticity of Demand
22. Exists if a producer can produce more of a good than all other producers
Marginal Product of Labor (MPL)
Economic Growth
Absolute Advantage
Economies of Scale
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
Inferior Goods
Market Equilibrium
Determinants of Supply
Constrained Utility Maximization
24. Costs that change with the level of output. If output is zero - so are TVCs.
Marginal tax rate
Perfectly elastic
Total variable costs (TVC)
Incidence of Tax
25. Ed > 1 - meaning consumers are price sensitive
Price elastic demand
Price Ceiling
Derived Demand
Utility Maximizing Rule
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.
Economic Profit
Marginal Revenue Product (MRP)
Shortage
Normal Goods
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
Normal Goods
Absolute prices
Public goods
Long Run
28. Costs that do not vary with changes in short-run output. They must be paid even when output is zero.
Marginal Analysis
Total Revenue Test
Total Fixed Costs (TFC)
Shortage
29. The more of a good that is produced - the greater the opportunity cost of producing the next unit of that good
Determinants of elasticity
Fixed inputs
Law of Increasing Costs
Price elastic demand
30. Production inputs that cannot be changed in the short run. Usually this is the plant size or capital
Incidence of Tax
Fixed inputs
Monopolistic competition
Marginal Cost (MC)
31. Exists if a producer can produce a good at lower opportunity cost than all other producers
Total Revenue Test
Comparative Advantage
Perfectly elastic
Incidence of Tax
32. The imbalance between limited productive resources and unlimited human wants
Utility Maximizing Rule
Market Economy (Capitalism)
Incidence of Tax
Scarcity
33. A good for which higher income increases demand
Total Fixed Costs (TFC)
Determinants of Labor Demand
Demand for Labor
Normal Goods
34. The difference between total revenue and total explicit costs
Marginal Benefit (MB)
Absolute prices
Accounting Profit
Specialization
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.
Diseconomies of Scale
Monopsonist
Spillover costs
Total Revenue Test
36. AFC = TFC/Q
Inferior Goods
Average Fixed Cost (AFC)
Implicit costs
Explicit costs
37. Total product divided by labor employed. APL = TPL/L
Marginal Revenue Product (MRP)
Spillover costs
Average Product of Labor (APL)
Income Effect
38. The rational decision maker chooses an action if MB = MC
Price Elasticity of Supply
Market Equilibrium
Marginal Analysis
Absolute prices
39. Es = (%dQs) / (%dPrice)
Price Elasticity of Supply
Four-firm concentration ratio
Marginal Revenue Product (MRP)
Break-even Point
40. The least competitive market structure - characterized by a single producer - with no close substitutes - barriers to entry - and price making power
Monopoly
Total Product of Labor (TPL)
Price elastic demand
Decreasing Cost industry
41. A market structure characterized by a few small firms producing a differentiated product with easy entry into the market
Total Revenue
Incidence of Tax
Positive externality
Monopolistic competition
42. The output where ATC is minimized and economic profit is zero
Break-even Point
Price discrimination
Price elastic demand
Accounting Profit
43. Exists when the production of a good imposes disutility upon third parties not directly involved in the consumption or production of the good
Unit elastic demand
Price discrimination
Total Fixed Costs (TFC)
Negative externality
44. Models where firms agree to mutually improve their situation
Constant Returns to Scale
Economics
Collusive oligopoly
Determinants of Labor Demand
45. Models where firms are competitive rivals seeking to gain at the expense of their rivals
Monopoly long-run equilibrium
Break-even Point
Non-collusive oligopoly
Diseconomies of Scale
46. The number of units of any other good Y that must be sacrificed to acquire good X. Only relative prices matter
Profit Maximizing Rule
Spillover costs
Relative Prices
Monopsonist
47. Two goods are consumer complements if they provide more utility when consumed together than when consumed separately
Complementary Goods
Law of Diminishing Marginal Utility
Perfect competition
Unit elastic demand
48. Labor demand for the firm is MRPL curve. The labor demanded for the entire market DL = ?MRPL of all firms
Constant cost industry
Demand for Labor
Market Economy (Capitalism)
Total Welfare
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
Allocative Efficiency
Total variable costs (TVC)
Free-Rider Problem
Income Effect
50. A firm that has market power in the factor market (a wage-setter)
Monopsonist
Non-collusive oligopoly
Variable inputs
Incidence of Tax