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AP Microeconomics

Subjects : economics, ap
Instructions:
  • Answer 50 questions in 15 minutes.
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  • Match each statement with the correct term.
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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






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






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






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






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






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






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






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






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






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






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






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






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






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






15. 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






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






17. Ei > 1






18. Es = (%dQs) / (%dPrice)






19. 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






20. 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






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






22. A good for which higher income increases demand






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






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






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






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






27. 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






28. 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






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






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






31. 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.






32. 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






33. The sum of consumer surplus and producer surplus






34. Two goods are consumer substitutes if they provide essentially the same utility to consumers






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






36. 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






37. 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






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






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






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






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






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






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






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






45. Ed > 1 - meaning consumers are price sensitive






46. AFC = TFC/Q






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






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






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






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







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