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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.
  • 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. Es = (%dQs) / (%dPrice)






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






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






4. 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






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






6. 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






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






8. Models where firms agree to mutually improve their situation






9. Ed < 1






10. AVC = TVC/Q






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






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






13. A good for which higher income increases demand






14. Ei > 1






15. Exists when the production of a good creates utility for third parties not directly involved in the consumption of production of the good






16. 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






17. 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






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






19. 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






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






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






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






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






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






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






26. 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.






27. The marginal utility from consumption of more and more of that item falls over time






28. 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






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






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






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






32. 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






33. A legal minimum price below which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent surplus






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






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






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






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






38. AFC = TFC/Q






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






40. Ed = 0 - no response to price change






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






42. 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






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






44. 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






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






46. 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






47. 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






48. 0 < Ei < 1






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






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