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AP Microeconomics

Subjects : economics, ap
  • 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. 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

2. 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

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

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

5. 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

6. AFC = TFC/Q

7. Ed > 1 - meaning consumers are price sensitive

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

9. The case where economies of scale are so extensive that it is less costly for one firm to supply the entire range of demand

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

11. The study of how people - firms - and societies use their scarce productive resources to best satisfy their unlimited material wants.

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

13. Factors of production - 4 categories: labor - physical capital - land/natural resources - and entrepreneurial ability

14. 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

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

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

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

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

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

20. The philosophy that a citizen should receive a share of economic resources proportional to the marginal revenue product of his or her productivity

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

22. A period of time long enough to alter the plant size. New firms can enter the industry and existing firms can liquidate and exit

23. 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

24. 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

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. TR = P * Qd

27. AVC = TVC/Q

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

29. A good for which higher income decreases demand

30. Occurs when an economy's production possibilities increase. This can be a result of more resources - better resources - or improvements in technology.

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

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

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

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

35. A good for which higher income increases demand

36. 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

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

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

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

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

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

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

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

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

45. An economic system based upon the fundamentals of private property - freedom - self-interest - and prices

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

47. Ed = 1

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

49. 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

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