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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. Measures the value of what the next unit of a resource (e.g. - labor) brings to the firm. MRPL = MR x MPL. In a perfectly competitive product market - MRPL = P x MPL. In a monopoly product market - MR < P so MRPm < MRPc.






2. The difference between total revenue and total explicit costs






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






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






5. 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






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






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






8. TR = P * Qd






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






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






11. 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






12. The ability to set the price above the perfectly competitive level






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






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






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






16. 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






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






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






19. 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.






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






21. 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






22. Ed = 1






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






24. Has opposite effect of an excise tax - as it lowers the marginal cost of production - forcing the supply curve down






25. 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






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






27. 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






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






29. When firms focus their resources on production of goods for which they have comparative advantage






30. Ed = 0 - no response to price change






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






32. AFC = TFC/Q






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






34. 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






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






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






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






38. 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






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






40. 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






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






42. 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






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






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






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






46. The study of how people - firms - and societies use their scarce productive resources to best satisfy their unlimited material wants.






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






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






49. 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






50. ATC = TC/Q = AFC + AVC






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