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






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






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






4. Ed < 1






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






6. 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






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






8. 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






9. A good for which higher income increases demand






10. Ed > 1 - meaning consumers are price sensitive






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






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






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






14. Ed = 8 - infinite change in demand to price change






15. 0 < Ei < 1






16. The sum of consumer surplus and producer surplus






17. 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.






18. 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






19. 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






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






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






22. 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






23. Two goods are consumer complements if they provide more utility when consumed together than when consumed separately






24. Total product divided by labor employed. APL = TPL/L






25. The lost net benefit to society caused by a movement away from the competitive market equilibrium






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






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






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






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






30. 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.






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






32. 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






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






34. Demand for a resource like labor is derived from the demand for the goods produced by the resource






35. 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






36. Ed = 0 - no response to price change






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






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






39. Entry of new firms shifts the cost curves for all firms upward






40. AFC = TFC/Q






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






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






43. 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






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






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






46. 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






47. 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






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






49. Occurs when an economy's production possibilities increase. This can be a result of more resources - better resources - or improvements in technology.






50. The least competitive market structure - characterized by a single producer - with no close substitutes - barriers to entry - and price making power