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






2. Ed > 1 - meaning consumers are price sensitive






3. 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






4. 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






5. The firm hires the profit maximizing amount of a resource at the point where MRP = MRC






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






7. 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






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






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






10. Product demand - productivity - prices of other resources - and complementary resources






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






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






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






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






15. 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






16. The most desirable alternative given up as the result of a decision






17. A good for which higher income increases demand






18. The difference between total revenue and total explicit costs






19. 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






20. 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






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






22. 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






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






24. 0 < Ei < 1






25. The ability to set the price above the perfectly competitive level






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






27. 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






28. 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






29. 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






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






31. Entry of new firms shifts the cost curves for all firms upward






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






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






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






35. 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






36. 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






37. Entry of new firms shifts the cost curves for all firms downward






38. All firms maximize profit by producing where MR = MC






39. 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






40. Indirect - non-purchased - or opportunity costs of resources provided by the entrepreneur






41. TR = P * Qd






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






43. 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






44. 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






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






46. 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






47. 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






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






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






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