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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.
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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. The case where economies of scale are so extensive that it is less costly for one firm to supply the entire range of demand






2. 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






3. 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






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






5. Production of maximum output for a given level of technology and resources. All points on the PPF are productively efficient






6. The practice of selling essentially the same good to different groups of consumers at different prices






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






8. 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






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






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






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






14. Ed = 0 - no response to price change






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






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






17. Consumer income - prices of substitute and complementary goods - consumer tastes and preferences - consumer speculation - and number of buyers in the market all influence demand






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






19. Ei > 1






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






21. 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






22. 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






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






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






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 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.






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






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






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






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






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






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






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






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






35. 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






36. Ed < 1






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






38. 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






39. ATC = TC/Q = AFC + AVC






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






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






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






43. 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






44. Costs that change with the level of output. If output is zero - so are TVCs.






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






46. Ei = (%dQd good X)/(%d Income)






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






48. 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






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






50. 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