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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. 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






2. 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






3. 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






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






5. 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.






6. 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






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






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






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






10. 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






11. 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






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






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






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






15. 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






16. Ed = 0 - no response to price change






17. Ed = 1






18. 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






19. Labor demand for the firm is MRPL curve. The labor demanded for the entire market DL = ?MRPL of all firms






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






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






23. Ed < 1






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






25. Ei > 1






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






27. 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






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






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






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






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






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






33. The sum of consumer surplus and producer surplus






34. 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






35. 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






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






37. 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






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






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






40. 0 < Ei < 1






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






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






43. 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






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






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






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






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






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






49. 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






50. 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