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






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






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






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






5. 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






6. 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






7. 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






8. 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






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






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






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






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






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






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






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






16. 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






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






18. 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






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






20. 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






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






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






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






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






25. 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.






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






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






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






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






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






31. The philosophy that a citizen should receive a share of economic resources proportional to the marginal revenue product of his or her productivity






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






33. 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






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






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






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






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






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






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






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






42. 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






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






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






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






46. 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






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






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






49. 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






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