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






2. A good for which higher income increases demand






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






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






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






6. 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






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






8. A firm that has market power in the factor market (a wage-setter)






9. 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






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






11. 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






12. 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






13. The firm hires the profit maximizing amount of a resource at the point where MRP = MRC






14. Ed = 1






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






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






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






18. 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






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






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






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






22. The rational decision maker chooses an action if MB = MC






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






24. 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.






25. 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






26. 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






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






28. 0 < Ei < 1






29. 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






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






31. 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






32. 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.






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






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






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






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






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






38. The mechanism for combining production resources - with existing technology - into finished goods and services






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






40. 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






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






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






43. The total quantity - or total output of a good produced at each quantity of labor employed






44. TR = P * Qd






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






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






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






48. 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






49. Ed > 1 - meaning consumers are price sensitive






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