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Test your basic knowledge |
AP Microeconomics
Start Test
Study First
Subjects
:
economics
,
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. Two goods are consumer complements if they provide more utility when consumed together than when consumed separately
Complementary Goods
Relative Prices
Unit elastic demand
Monopoly
2. Total product divided by labor employed. APL = TPL/L
Resources
Marginal Resource Cost (MRC)
Marginal tax rate
Average Product of Labor (APL)
3. 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
Normal Profit
Determinants of Supply
Price floor
Spillover benefits
4. Models where firms agree to mutually improve their situation
Collusive oligopoly
Price floor
Market Economy (Capitalism)
Perfectly competitive long-run equilibrium
5. 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.
Market power
Perfect competition
Determinants of elasticity
Marginal Revenue Product (MRP)
6. Es = (%dQs) / (%dPrice)
Monopoly long-run equilibrium
Substitution Effect
Average Fixed Cost (AFC)
Price Elasticity of Supply
7. Holding all else equal - when the price of a good rises - consumers decrease their quantity demanded for that good
Price Elasticity of Supply
Law of Demand
Constrained Utility Maximization
Monopoly
8. Models where firms are competitive rivals seeking to gain at the expense of their rivals
Income Effect
Determinants of Labor Demand
Non-collusive oligopoly
Dead Weight Loss
9. Occurs when LRAC is constant over a variety of plant sizes
Absolute prices
Constant Returns to Scale
Comparative Advantage
Dead Weight Loss
10. The ability to set the price above the perfectly competitive level
Price discrimination
Surplus
Market power
Complementary Goods
11. The price of a good measured in units of currency
Profit Maximizing Rule
Spillover costs
Absolute prices
Constant Returns to Scale
12. Ei = (%dQd good X)/(%d Income)
Perfectly inelastic
Dead Weight Loss
Income Elasticity
Complementary Goods
13. The case where economies of scale are so extensive that it is less costly for one firm to supply the entire range of demand
Determinants of Labor Demand
Opportunity Cost
Average Total Cost (ATC)
Natural Monopoly
14. The sum of consumer surplus and producer surplus
Long Run
Explicit costs
Total Welfare
Variable inputs
15. 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
Price floor
Price inelastic demand
Cross-Price Elasticity of Demand
16. 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
Increasing Cost Industry
Spillover costs
Shutdown Point
Consumer surplus
17. 0 < Ei < 1
Income Elasticity
Consumer surplus
Necessity
Cartel
18. The change in total product resulting from a change in the labor input. MPL = dTPL/dL - or the slope of total product
Marginal Product of Labor (MPL)
Price Elasticity of Supply
Complementary Goods
Increasing Cost Industry
19. The difference between total revenue and total explicit and implicit costs
Allocative Efficiency
Resources
Economic Profit
Variable inputs
20. 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
Cartel
Marginal Analysis
Free-Rider Problem
21. Production of maximum output for a given level of technology and resources. All points on the PPF are productively efficient
Constrained Utility Maximization
Spillover costs
Variable inputs
Productive Efficiency
22. The marginal utility from consumption of more and more of that item falls over time
Price discrimination
Decreasing Cost industry
Law of Diminishing Marginal Utility
Private goods
23. The combination of labor and capital that minimizes total costs for a given production rate. Hire L and K so that MPL / PL = MPK / PK or MPL/MPK = PL/PK
Collusive oligopoly
Least-Cost Rule
Allocative Efficiency
Constant Returns to Scale
24. The more of a good that is produced - the greater the opportunity cost of producing the next unit of that good
Law of Increasing Costs
Marginal Productivity Theory
Producer surplus
Absolute prices
25. A very diverse market structure characterized by a small number of interdependent large firms - producing a standardized or differentiated product in a market with a barrier to entry
Oligopoly
Economic Profit
Total variable costs (TVC)
Utility Maximizing Rule
26. 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
Spillover costs
Production function
Cartel
Producer surplus
27. 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
Spillover benefits
Four-firm concentration ratio
Determinants of Supply
Allocative Efficiency
28. The philosophy that a citizen should receive a share of economic resources proportional to the marginal revenue product of his or her productivity
Negative externality
Price elastic demand
Increasing Cost Industry
Marginal Productivity Theory
29. Characterized by many small price-taking firms producing a standardized product in an industry in which there are no barriers to entry or exit
Absolute Advantage
Perfect competition
Specialization
Market Equilibrium
30. The change in quantity demanded resulting from a change in the price of one good relative to other goods
Substitution Effect
Determinants of Labor Demand
Cartel
Resources
31. 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
Total variable costs (TVC)
Price floor
Average Total Cost (ATC)
Normal Profit
32. 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
Negative externality
Marginal Product of Labor (MPL)
Cross-Price Elasticity of Demand
Market power
33. 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
Specialization
Variable inputs
Unit elastic demand
Economic Profit
34. The difference between the monopolistic competition output Qmc and the output at minimum ATC. Excess capacity is underused plant and equipment
Excess Capacity
Absolute Advantage
Marginal Resource Cost (MRC)
Increasing Cost Industry
35. A per unit tax on production results in a vertical shift in the supply curve by the amount of the tax
Public goods
Price elastic demand
Complementary Goods
Excise Tax
36. The additional cost incurred from the consumption of the next unit of a good or a service
Derived Demand
Marginal Cost (MC)
Long Run
Determinants of elasticity
37. The practice of selling essentially the same good to different groups of consumers at different prices
Least-Cost Rule
Price discrimination
Price elastic demand
Perfectly elastic
38. Entry of new firms shifts the cost curves for all firms downward
Allocative Efficiency
Determinants of Labor Demand
Decreasing Cost industry
Marginal Productivity Theory
39. 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 Goods
Monopoly long-run equilibrium
Law of Increasing Costs
Total Revenue Test
40. Exists if a producer can produce a good at lower opportunity cost than all other producers
Surplus
Total variable costs (TVC)
Comparative Advantage
Total Revenue
41. 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
Productive Efficiency
Economic Growth
Spillover costs
Perfectly inelastic
42. Total revenue rises with a price increase if demand is price inelastic and falls with a price increase if demand is price elastic
Marginal Revenue Product (MRP)
Relative Prices
Perfectly inelastic
Total Revenue Test
43. The imbalance between limited productive resources and unlimited human wants
Perfectly inelastic
Free-Rider Problem
Scarcity
Break-even Point
44. Demand for a resource like labor is derived from the demand for the goods produced by the resource
Derived Demand
Monopsonist
Utility Maximizing Rule
Monopoly long-run equilibrium
45. The additional benefit received from the consumption of the next unit of a good or service
Marginal Benefit (MB)
Four-firm concentration ratio
Monopsonist
Average Fixed Cost (AFC)
46. The rational decision maker chooses an action if MB = MC
Oligopoly
Marginal Analysis
Total variable costs (TVC)
Variable inputs
47. A period of time too short to change the size of the plant - but many other - more variable resources can be changed to meet demand
Short run
Fixed inputs
Free-Rider Problem
Unit elastic demand
48. When firms focus their resources on production of goods for which they have comparative advantage
Monopoly
Total Product of Labor (TPL)
Total variable costs (TVC)
Specialization
49. Substitutes - cost as percentage of income - and time to adjust to price changes all influence price elasticity
Decreasing Cost industry
Marginal tax rate
Determinants of elasticity
Necessity
50. Ed = (%dQd)/(%dP). Ignore negative sign
Surplus
Accounting Profit
Specialization
Price elasticity