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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. 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






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






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






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






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






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






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






8. Ed = 0 - no response to price change






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






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






11. 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






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






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






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






15. TR = P * Qd






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






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






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






19. AFC = TFC/Q






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






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






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






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






24. AVC = TVC/Q






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






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






27. The change in quantity demanded that results from a change in the consumer's purchasing power (or real income)






28. 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.






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






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






31. A good for which higher income increases demand






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






33. The lost net benefit to society caused by a movement away from the competitive market equilibrium






34. 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






35. 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






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






37. Ed < 1






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






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






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






41. 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






42. Another way of saying that firms are earning zero economic profits or a fair rate of return on invested resources






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






44. 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






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






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






47. Ed = 1






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






49. 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






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