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






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






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






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






5. The imbalance between limited productive resources and unlimited human wants






6. 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






7. AFC = TFC/Q






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






9. 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






10. 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






11. 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.






12. 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






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






14. 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






15. Ei = (%dQd good X)/(%d Income)






16. 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






17. A good for which higher income increases demand






18. 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.






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






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






21. 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






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






23. 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






24. The price of a good measured in units of currency






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






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






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






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






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






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






31. The marginal utility from consumption of more and more of that item falls over time






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






33. 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






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






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






36. Direct - purchased - out-of-pocket costs paid to resource suppliers provided by the entrepreneur






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






38. Ed < 1






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






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






41. 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






42. Ed = 0 - no response to price change






43. When firms focus their resources on production of goods for which they have comparative advantage






44. The sum of consumer surplus and producer surplus






45. 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






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






47. 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






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






49. 0 < Ei < 1






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