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AP Microeconomics

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






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






3. 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






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






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






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. 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






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






9. 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






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






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






12. 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






13. 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






14. A good for which higher income increases demand






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






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






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






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






20. 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






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






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






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






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






25. 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






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






27. Models where firms agree to mutually improve their situation






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






29. 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






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






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






32. 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






33. The sum of consumer surplus and producer surplus






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






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






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






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






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






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






40. 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






41. 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






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






43. 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






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






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






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






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






48. An economic system based upon the fundamentals of private property - freedom - self-interest - and prices






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






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