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Test your basic knowledge |
AP Microeconomics
Start Test
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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. Occurs when LRAC is constant over a variety of plant sizes
Average Total Cost (ATC)
Demand for Labor
Luxury
Constant Returns to Scale
2. Exists if a producer can produce a good at lower opportunity cost than all other producers
Law of Diminishing Marginal Utility
Absolute prices
Marginal Revenue Product (MRP)
Comparative Advantage
3. Models where firms are competitive rivals seeking to gain at the expense of their rivals
Non-collusive oligopoly
Comparative Advantage
Oligopoly
Increasing Cost Industry
4. Production of the combination of goods and services that provides the most net benefit to society. The optimal quantity of a good is achieved when the MB = MC of the next unit and only occurs at one point on the PPF
Implicit costs
Allocative Efficiency
Productive Efficiency
Perfect competition
5. The most desirable alternative given up as the result of a decision
Relative Prices
Opportunity Cost
Public goods
Market Equilibrium
6. A market structure characterized by a few small firms producing a differentiated product with easy entry into the market
Monopolistic competition
Complementary Goods
Shortage
Incidence of Tax
7. Substitutes - cost as percentage of income - and time to adjust to price changes all influence price elasticity
Increasing Cost Industry
Necessity
Diseconomies of Scale
Determinants of elasticity
8. Factors of production - 4 categories: labor - physical capital - land/natural resources - and entrepreneurial ability
Perfectly inelastic
Marginal Product of Labor (MPL)
Specialization
Resources
9. 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
Normal Profit
Excise Tax
Constrained Utility Maximization
Profit Maximizing Resource Employment
10. 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
Shutdown Point
Price inelastic demand
Perfectly elastic
Total variable costs (TVC)
11. Occurs when there is no more incentive for firms to enter or exit. P=MR=MC=ATC and profit = 0
Price elasticity
Increasing Cost Industry
Perfectly competitive long-run equilibrium
Monopolistic competition
12. The output where ATC is minimized and economic profit is zero
Oligopoly
Break-even Point
Marginal Product of Labor (MPL)
Decreasing Cost industry
13. Production inputs that cannot be changed in the short run. Usually this is the plant size or capital
Fixed inputs
Public goods
Derived Demand
Comparative Advantage
14. Total product divided by labor employed. APL = TPL/L
Average Product of Labor (APL)
Price Elasticity of Supply
Marginal Analysis
Cross-Price Elasticity of Demand
15. Exists when the production of a good creates utility for third parties not directly involved in the consumption of production of the good
Demand for Labor
Total Fixed Costs (TFC)
Determinants of elasticity
Positive externality
16. 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
Producer surplus
Subsidy
Oligopoly
Increasing Cost Industry
17. Product demand - productivity - prices of other resources - and complementary resources
Determinants of elasticity
Cartel
Determinants of Labor Demand
Price Ceiling
18. 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
Break-even Point
Public goods
Surplus
Spillover benefits
19. Costs that do not vary with changes in short-run output. They must be paid even when output is zero.
Total Revenue Test
Specialization
Profit Maximizing Rule
Total Fixed Costs (TFC)
20. The difference between total revenue and total explicit costs
Variable inputs
Profit Maximizing Rule
Determinants of Supply
Accounting Profit
21. The philosophy that a citizen should receive a share of economic resources proportional to the marginal revenue product of his or her productivity
Necessity
Marginal Resource Cost (MRC)
Shortage
Marginal Productivity Theory
22. 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
Free-Rider Problem
Normal Profit
Collusive oligopoly
Explicit costs
23. Ed < 1
Price inelastic demand
Short run
Scarcity
Monopsonist
24. Another way of saying that firms are earning zero economic profits or a fair rate of return on invested resources
Normal Profit
Price Elasticity of Supply
Explicit costs
Monopolistic competition long-run equilibrium
25. When firms focus their resources on production of goods for which they have comparative advantage
Monopolistic competition
Specialization
Luxury
Average Fixed Cost (AFC)
26. The additional cost incurred from the consumption of the next unit of a good or a service
Comparative Advantage
Marginal Cost (MC)
Perfectly elastic
Total Welfare
27. The marginal utility from consumption of more and more of that item falls over time
Law of Diminishing Marginal Utility
Necessity
Average Variable Cost (AVC)
Monopoly long-run equilibrium
28. 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
Incidence of Tax
Luxury
Marginal Revenue Product (MRP)
Determinants of elasticity
29. Ei = (%dQd good X)/(%d Income)
Income Elasticity
Natural Monopoly
Price elastic demand
Scarcity
30. 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
Marginal Resource Cost (MRC)
Monopoly
Marginal Product of Labor (MPL)
Free-Rider Problem
31. A per unit tax on production results in a vertical shift in the supply curve by the amount of the tax
Determinants of Labor Demand
Market Equilibrium
Price Elasticity of Supply
Excise Tax
32. Ei > 1
Short run
Luxury
Market Equilibrium
Price discrimination
33. The study of how people - firms - and societies use their scarce productive resources to best satisfy their unlimited material wants.
Productive Efficiency
Substitute Goods
Economics
Free-Rider Problem
34. The mechanism for combining production resources - with existing technology - into finished goods and services
Income Effect
Law of Supply
Determinants of Supply
Production function
35. 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
Normal Profit
Cross-Price Elasticity of Demand
Total Revenue Test
Law of Increasing Costs
36. Ed = 0 - no response to price change
Price elasticity
Perfectly inelastic
Short run
Total variable costs (TVC)
37. AFC = TFC/Q
Law of Increasing Costs
Average Fixed Cost (AFC)
Diseconomies of Scale
Determinants of Supply
38. 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
Price Ceiling
Shortage
Productive Efficiency
Resources
39. Has opposite effect of an excise tax - as it lowers the marginal cost of production - forcing the supply curve down
Price Ceiling
Normal Goods
Subsidy
Derived Demand
40. Costs that change with the level of output. If output is zero - so are TVCs.
Break-even Point
Incidence of Tax
Law of Demand
Total variable costs (TVC)
41. Exists at the point where the quantity supplied equals the quantity demanded
Market Equilibrium
Inferior Goods
Public goods
Positive externality
42. 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.
Total Revenue
Comparative Advantage
Unit elastic demand
Economies of Scale
43. 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
Dead Weight Loss
Monopolistic competition
Constant Returns to Scale
44. Ed = (%dQd)/(%dP). Ignore negative sign
Determinants of Supply
Price elasticity
Price Ceiling
Average Variable Cost (AVC)
45. Occurs when an economy's production possibilities increase. This can be a result of more resources - better resources - or improvements in technology.
Economic Growth
Short run
Incidence of Tax
Spillover benefits
46. 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
Unit elastic demand
Average Variable Cost (AVC)
Implicit costs
Oligopoly
47. The rational decision maker chooses an action if MB = MC
Break-even Point
Income Effect
Marginal Analysis
Determinants of elasticity
48. The lost net benefit to society caused by a movement away from the competitive market equilibrium
Monopolistic competition
Marginal Revenue Product (MRP)
Dead Weight Loss
Determinants of Supply
49. Exists when the production of a good imposes disutility upon third parties not directly involved in the consumption or production of the good
Inferior Goods
Collusive oligopoly
Monopoly long-run equilibrium
Negative externality
50. The case where economies of scale are so extensive that it is less costly for one firm to supply the entire range of demand
Market Economy (Capitalism)
Positive externality
Substitute Goods
Natural Monopoly