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Test your basic knowledge |
AP Microeconomics
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Subjects
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economics
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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 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.
Shutdown Point
Economic Profit
Marginal Revenue Product (MRP)
Necessity
2. Entry (or exit) of firms does not shift the cost curves of firms in the industry
Average Fixed Cost (AFC)
Cross-Price Elasticity of Demand
Constant cost industry
Perfectly inelastic
3. The difference between total revenue and total explicit and implicit costs
Subsidy
Average Total Cost (ATC)
Oligopoly
Economic Profit
4. 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
Normal Profit
Monopoly long-run equilibrium
Average Fixed Cost (AFC)
Resources
5. Ed < 1
Natural Monopoly
Market Economy (Capitalism)
Average Total Cost (ATC)
Price inelastic demand
6. 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
Spillover benefits
Determinants of Labor Demand
Free-Rider Problem
Scarcity
7. Indirect - non-purchased - or opportunity costs of resources provided by the entrepreneur
Total Fixed Costs (TFC)
Implicit costs
Absolute Advantage
Price Ceiling
8. Two goods are consumer complements if they provide more utility when consumed together than when consumed separately
Average Product of Labor (APL)
Average Variable Cost (AVC)
Complementary Goods
Determinants of Supply
9. The philosophy that a citizen should receive a share of economic resources proportional to the marginal revenue product of his or her productivity
Price elasticity
Marginal Productivity Theory
Average Product of Labor (APL)
Perfect competition
10. Labor demand for the firm is MRPL curve. The labor demanded for the entire market DL = ?MRPL of all firms
Demand for Labor
Perfectly elastic
Dead Weight Loss
Explicit costs
11. Holding all else equal - when the price of a good rises - consumers decrease their quantity demanded for that good
Implicit costs
Average Variable Cost (AVC)
Perfect competition
Law of Demand
12. The least competitive market structure - characterized by a single producer - with no close substitutes - barriers to entry - and price making power
Increasing Cost Industry
Allocative Efficiency
Short run
Monopoly
13. Exists when the production of a good creates utility for third parties not directly involved in the consumption of production of the good
Perfectly elastic
Positive externality
Marginal tax rate
Implicit costs
14. The number of units of any other good Y that must be sacrificed to acquire good X. Only relative prices matter
Relative Prices
Non-collusive oligopoly
Determinants of Supply
Positive externality
15. Models where firms are competitive rivals seeking to gain at the expense of their rivals
Price inelastic demand
Average Fixed Cost (AFC)
Non-collusive oligopoly
Absolute prices
16. The case where economies of scale are so extensive that it is less costly for one firm to supply the entire range of demand
Price inelastic demand
Complementary Goods
Natural Monopoly
Relative Prices
17. Ei = (%dQd good X)/(%d Income)
Constrained Utility Maximization
Law of Increasing Costs
Price Elasticity of Supply
Income Elasticity
18. Es = (%dQs) / (%dPrice)
Decreasing Cost industry
Marginal Benefit (MB)
Average Total Cost (ATC)
Price Elasticity of Supply
19. Exists if a producer can produce a good at lower opportunity cost than all other producers
Comparative Advantage
Income Elasticity
Shortage
Market power
20. Demand for a resource like labor is derived from the demand for the goods produced by the resource
Derived Demand
Long Run
Opportunity Cost
Spillover costs
21. 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
Four-firm concentration ratio
Monopolistic competition long-run equilibrium
Absolute Advantage
Allocative Efficiency
22. Models where firms agree to mutually improve their situation
Free-Rider Problem
Collusive oligopoly
Constant Returns to Scale
Economic Profit
23. A good for which higher income increases demand
Determinants of Supply
Normal Goods
Accounting Profit
Short run
24. The rational decision maker chooses an action if MB = MC
Marginal Resource Cost (MRC)
Opportunity Cost
Marginal Analysis
Decreasing Cost industry
25. Exists when the production of a good imposes disutility upon third parties not directly involved in the consumption or production of the good
Perfectly competitive long-run equilibrium
Negative externality
Resources
Surplus
26. 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.
Explicit costs
Diseconomies of Scale
Average Variable Cost (AVC)
Implicit costs
27. 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
Economic Profit
Constrained Utility Maximization
Spillover costs
Profit Maximizing Rule
28. 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
Substitution Effect
Price floor
Monopoly long-run equilibrium
Marginal Benefit (MB)
29. A good for which higher income decreases demand
Resources
Price inelastic demand
Inferior Goods
Absolute Advantage
30. Exists at the point where the quantity supplied equals the quantity demanded
Market Equilibrium
Non-collusive oligopoly
Determinants of Supply
Free-Rider Problem
31. A period of time long enough to alter the plant size. New firms can enter the industry and existing firms can liquidate and exit
Free-Rider Problem
Long Run
Consumer surplus
Price inelastic demand
32. AVC = TVC/Q
Scarcity
Average Variable Cost (AVC)
Negative externality
Shortage
33. Costs that do not vary with changes in short-run output. They must be paid even when output is zero.
Total Fixed Costs (TFC)
Productive Efficiency
Substitution Effect
Market power
34. The difference between the monopolistic competition output Qmc and the output at minimum ATC. Excess capacity is underused plant and equipment
Dead Weight Loss
Average Product of Labor (APL)
Producer surplus
Excess Capacity
35. Total product divided by labor employed. APL = TPL/L
Incidence of Tax
Four-firm concentration ratio
Marginal Productivity Theory
Average Product of Labor (APL)
36. The marginal utility from consumption of more and more of that item falls over time
Implicit costs
Incidence of Tax
Law of Diminishing Marginal Utility
Monopoly long-run equilibrium
37. MUx / Px = MUy/Py or MUx/MUy = Px/Py
Shortage
Marginal Productivity Theory
Price Ceiling
Utility Maximizing Rule
38. 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
Consumer surplus
Profit Maximizing Rule
Marginal Cost (MC)
Average Product of Labor (APL)
39. The output where ATC is minimized and economic profit is zero
Private goods
Average Total Cost (ATC)
Specialization
Break-even Point
40. 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
Subsidy
Spillover costs
Marginal Benefit (MB)
Perfect competition
41. Ed = 8 - infinite change in demand to price change
Substitute Goods
Perfectly elastic
Least-Cost Rule
Consumer surplus
42. 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
Marginal Product of Labor (MPL)
Incidence of Tax
Production function
Consumer surplus
43. All firms maximize profit by producing where MR = MC
Collusive oligopoly
Price floor
Fixed inputs
Profit Maximizing Rule
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
Short run
Substitution Effect
Producer surplus
Luxury
45. 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
Price Ceiling
Price elasticity
Monopoly
Absolute Advantage
46. Total revenue rises with a price increase if demand is price inelastic and falls with a price increase if demand is price elastic
Total Revenue Test
Monopsonist
Free-Rider Problem
Income Effect
47. The more of a good that is produced - the greater the opportunity cost of producing the next unit of that good
Implicit costs
Marginal Analysis
Subsidy
Law of Increasing Costs
48. The total quantity - or total output of a good produced at each quantity of labor employed
Demand for Labor
Negative externality
Determinants of Labor Demand
Total Product of Labor (TPL)
49. When firms focus their resources on production of goods for which they have comparative advantage
Productive Efficiency
Substitution Effect
Specialization
Monopolistic competition
50. Costs that change with the level of output. If output is zero - so are TVCs.
Total variable costs (TVC)
Total Fixed Costs (TFC)
Explicit costs
Substitution Effect