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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. Ed > 1 - meaning consumers are price sensitive






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






3. 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






4. AVC = TVC/Q






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






6. ATC = TC/Q = AFC + AVC






7. 0 < Ei < 1






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






9. 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






10. 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






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






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






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






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






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






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






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






18. MUx / Px = MUy/Py or MUx/MUy = Px/Py






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






20. The downward part of the LRAC curve where LRAC falls as plan size increases. This is the result of specialization - lower cost of inputs - or other efficiencies of larger scale.






21. The sum of consumer surplus and producer surplus






22. TR = P * Qd






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






24. 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






25. The change in quantity demanded that results from a change in the consumer's purchasing power (or real income)






26. Ed = 0 - no response to price change






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






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






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






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






31. 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






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






33. The change in quantity demanded resulting from a change in the price of one good relative to other goods






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






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






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






37. 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






38. A good for which higher income decreases demand






39. 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.






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






41. Ei > 1






42. A good for which higher income increases demand






43. A per unit tax on production results in a vertical shift in the supply curve by the amount of the tax






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






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






46. The change in total product resulting from a change in the labor input. MPL = dTPL/dL - or the slope of total product






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






48. 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






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






50. Models where firms are competitive rivals seeking to gain at the expense of their rivals