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






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






3. 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






4. 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






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






6. The difference between total revenue and total explicit costs






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






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






9. 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






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






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






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






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






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






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






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






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






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






19. 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






20. 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.






21. Ed > 1 - meaning consumers are price sensitive






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






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






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






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






26. 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






27. 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






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. Models where firms agree to mutually improve their situation






30. Factors of production - 4 categories: labor - physical capital - land/natural resources - and entrepreneurial ability






31. 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






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






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






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






35. The additional benefit received from the consumption of the next unit of a good or service






36. Ed = 0 - no response to price change






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






38. 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






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






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






41. 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






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






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






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






45. 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






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






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






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






49. 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






50. 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