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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. 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






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






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






4. 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






5. 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






6. Ed = 1






7. Excess demand; a shortage exists at a market price when the quantity demanded exceeds the quantity supplied






8. 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






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






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






11. The difference between total revenue and total explicit costs






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






13. 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






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






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






16. The price of a good measured in units of currency






17. Additional costs to society not captured by the market supply curve from the production of a good - result in a price that is too low and a market quantity that is too high. Resources are overallocated to the production of this good






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






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






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






22. AVC = TVC/Q






23. 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






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






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






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






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






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






29. TR = P * Qd






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






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






32. AFC = TFC/Q






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






34. 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






35. 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






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






37. The change in total product resulting from a change in the labor input. MPL = dTPL/dL - or the slope of total product






38. 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.






39. 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






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






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






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






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






44. 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






45. Ei > 1






46. The output where ATC is minimized and economic profit is zero






47. ATC = TC/Q = AFC + AVC






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






49. 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






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