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






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






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






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






5. Ed = (%dQd)/(%dP). Ignore negative sign






6. 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.






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






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






9. Has opposite effect of an excise tax - as it lowers the marginal cost of production - forcing the supply curve down






10. Pm > MR = MC - which is not allocatively efficient and dead weight loss exists. Pm > ATC - which is not productively efficient. Profit > 0 so consumer surplus is transferred to the monopolist as profit






11. Consumer income - prices of substitute and complementary goods - consumer tastes and preferences - consumer speculation - and number of buyers in the market all influence demand






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






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






14. Substitutes - cost as percentage of income - and time to adjust to price changes all influence price elasticity






15. 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






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






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






18. 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






19. Production of maximum output for a given level of technology and resources. All points on the PPF are productively efficient






20. 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






21. Models where firms agree to mutually improve their situation






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






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






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






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






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






27. The price of a good measured in units of currency






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






29. 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






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






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






32. 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






33. 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






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






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






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






37. 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






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






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






40. The total quantity - or total output of a good produced at each quantity of labor employed






41. 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






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






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






44. 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






45. AFC = TFC/Q






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






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






48. 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






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






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







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