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






2. The additional benefit received from the consumption of the next unit of a good or service






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






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






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






7. A good for which higher income decreases demand






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






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






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






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






12. ATC = TC/Q = AFC + AVC






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






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. All firms maximize profit by producing where MR = MC






16. 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






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






18. Ed > 1 - meaning consumers are price sensitive






19. AFC = TFC/Q






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






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






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






23. 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






24. 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






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






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






27. A good for which higher income increases demand






28. 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






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






30. 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.






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






32. TR = P * Qd






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






34. 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






35. 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






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






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






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






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






40. 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






41. AVC = TVC/Q






42. 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






43. 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






44. 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






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






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






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






48. 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.






49. Occurs when LRAC is constant over a variety of plant sizes






50. 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