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Test your basic knowledge |
AP Microeconomics
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Subjects
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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. 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
Spillover benefits
Marginal Resource Cost (MRC)
Free-Rider Problem
Market power
2. The philosophy that a citizen should receive a share of economic resources proportional to the marginal revenue product of his or her productivity
Marginal Productivity Theory
Price elastic demand
Perfectly elastic
Total Revenue
3. Exists at the point where the quantity supplied equals the quantity demanded
Private goods
Total Fixed Costs (TFC)
Market Equilibrium
Diseconomies of Scale
4. The practice of selling essentially the same good to different groups of consumers at different prices
Comparative Advantage
Monopoly
Price discrimination
Price Elasticity of Supply
5. The difference between the monopolistic competition output Qmc and the output at minimum ATC. Excess capacity is underused plant and equipment
Determinants of Demand
Excess Capacity
Average Variable Cost (AVC)
Marginal Resource Cost (MRC)
6. The change in quantity demanded that results from a change in the consumer's purchasing power (or real income)
Productive Efficiency
Short run
Perfectly inelastic
Income Effect
7. Direct - purchased - out-of-pocket costs paid to resource suppliers provided by the entrepreneur
Monopoly
Explicit costs
Four-firm concentration ratio
Price inelastic demand
8. Ed = (%dQd)/(%dP). Ignore negative sign
Price elasticity
Decreasing Cost industry
Free-Rider Problem
Perfectly elastic
9. 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
Inferior Goods
Least-Cost Rule
Collusive oligopoly
Resources
10. Occurs when LRAC is constant over a variety of plant sizes
Public goods
Constant Returns to Scale
Demand for Labor
Price discrimination
11. A per unit tax on production results in a vertical shift in the supply curve by the amount of the tax
Specialization
Excise Tax
Law of Increasing Costs
Variable inputs
12. Demand for a resource like labor is derived from the demand for the goods produced by the resource
Derived Demand
Marginal Benefit (MB)
Short run
Substitute Goods
13. Factors of production - 4 categories: labor - physical capital - land/natural resources - and entrepreneurial ability
Perfectly elastic
Price Elasticity of Supply
Subsidy
Resources
14. Two goods are consumer complements if they provide more utility when consumed together than when consumed separately
Complementary Goods
Normal Profit
Average Fixed Cost (AFC)
Marginal Benefit (MB)
15. The total quantity - or total output of a good produced at each quantity of labor employed
Total Product of Labor (TPL)
Shortage
Long Run
Average Product of Labor (APL)
16. Ed < 1
Implicit costs
Economies of Scale
Absolute prices
Price inelastic demand
17. The imbalance between limited productive resources and unlimited human wants
Total variable costs (TVC)
Long Run
Excess Capacity
Scarcity
18. 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
Total Revenue
Price discrimination
Total Fixed Costs (TFC)
Spillover benefits
19. AVC = TVC/Q
Average Variable Cost (AVC)
Average Product of Labor (APL)
Law of Supply
Marginal Analysis
20. Entry of new firms shifts the cost curves for all firms upward
Total Fixed Costs (TFC)
Increasing Cost Industry
Perfectly inelastic
Price Ceiling
21. 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
Productive Efficiency
Monopoly long-run equilibrium
Specialization
Incidence of Tax
22. The number of units of any other good Y that must be sacrificed to acquire good X. Only relative prices matter
Decreasing Cost industry
Substitution Effect
Relative Prices
Four-firm concentration ratio
23. Two goods are consumer substitutes if they provide essentially the same utility to consumers
Relative Prices
Productive Efficiency
Break-even Point
Substitute Goods
24. 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
Total Welfare
Price elastic demand
Price Ceiling
Monopsonist
25. 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
Marginal tax rate
Average Product of Labor (APL)
Fixed inputs
Marginal Benefit (MB)
26. The output where ATC is minimized and economic profit is zero
Diseconomies of Scale
Break-even Point
Total Product of Labor (TPL)
Spillover costs
27. 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
Law of Supply
Total Revenue
Economies of Scale
28. The sum of consumer surplus and producer surplus
Market Equilibrium
Market power
Absolute Advantage
Total Welfare
29. The ability to set the price above the perfectly competitive level
Allocative Efficiency
Market power
Productive Efficiency
Average Total Cost (ATC)
30. When firms focus their resources on production of goods for which they have comparative advantage
Fixed inputs
Monopoly
Specialization
Law of Increasing Costs
31. Ed = 1
Marginal Revenue Product (MRP)
Unit elastic demand
Marginal Benefit (MB)
Income Effect
32. 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
Inferior Goods
Marginal Benefit (MB)
Increasing Cost Industry
Four-firm concentration ratio
33. Occurs when an economy's production possibilities increase. This can be a result of more resources - better resources - or improvements in technology.
Marginal Resource Cost (MRC)
Economic Growth
Perfect competition
Long Run
34. Product demand - productivity - prices of other resources - and complementary resources
Marginal Analysis
Average Fixed Cost (AFC)
Necessity
Determinants of Labor Demand
35. In the case of a public good - some members of the community know that they can consume the public good while others provide for it. This results in a lack of private funding and forces the government to provide it
Derived Demand
Natural Monopoly
Free-Rider Problem
Cross-Price Elasticity of Demand
36. A period of time long enough to alter the plant size. New firms can enter the industry and existing firms can liquidate and exit
Market Economy (Capitalism)
Long Run
Price Elasticity of Supply
Non-collusive oligopoly
37. The firm hires the profit maximizing amount of a resource at the point where MRP = MRC
Marginal Benefit (MB)
Incidence of Tax
Profit Maximizing Resource Employment
Total Fixed Costs (TFC)
38. Total revenue rises with a price increase if demand is price inelastic and falls with a price increase if demand is price elastic
Determinants of Labor Demand
Normal Goods
Oligopoly
Total Revenue Test
39. 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
Perfectly competitive long-run equilibrium
Producer surplus
Incidence of Tax
Price floor
40. Excess demand; a shortage exists at a market price when the quantity demanded exceeds the quantity supplied
Fixed inputs
Shortage
Marginal Productivity Theory
Least-Cost Rule
41. 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
Marginal Revenue Product (MRP)
Economic Growth
Scarcity
Cross-Price Elasticity of Demand
42. The additional benefit received from the consumption of the next unit of a good or service
Spillover costs
Monopolistic competition
Marginal Benefit (MB)
Total Revenue Test
43. 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
Determinants of Supply
Monopsonist
Shutdown Point
Cross-Price Elasticity of Demand
44. Substitutes - cost as percentage of income - and time to adjust to price changes all influence price elasticity
Perfectly elastic
Determinants of elasticity
Demand for Labor
Complementary Goods
45. The mechanism for combining production resources - with existing technology - into finished goods and services
Price elastic demand
Production function
Spillover benefits
Constrained Utility Maximization
46. The most desirable alternative given up as the result of a decision
Opportunity Cost
Fixed inputs
Diseconomies of Scale
Necessity
47. 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
Total variable costs (TVC)
Accounting Profit
Incidence of Tax
Break-even Point
48. 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
Total variable costs (TVC)
Monopolistic competition long-run equilibrium
Excess Capacity
Variable inputs
49. Indirect - non-purchased - or opportunity costs of resources provided by the entrepreneur
Excise Tax
Public goods
Implicit costs
Determinants of elasticity
50. Labor demand for the firm is MRPL curve. The labor demanded for the entire market DL = ?MRPL of all firms
Monopoly long-run equilibrium
Demand for Labor
Total Welfare
Market Economy (Capitalism)