Test your basic knowledge |

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 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






2. 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






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






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






5. The sum of consumer surplus and producer surplus






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






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






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






9. 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






10. 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






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






12. 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






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






14. Ei > 1






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






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






17. AFC = TFC/Q






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






19. The number of units of any other good Y that must be sacrificed to acquire good X. Only relative prices matter






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






21. 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.






22. 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.






23. 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






24. 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






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






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






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






28. 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






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






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






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






32. 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.






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






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






35. 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






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






37. A good for which higher income decreases demand






38. Occurs when there is no more incentive for firms to enter or exit. P=MR=MC=ATC and profit = 0






39. The difference between total revenue and total explicit and implicit costs






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






41. 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






42. Two goods are consumer substitutes if they provide essentially the same utility to consumers






43. 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






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






45. Ed = 0 - no response to price change






46. A good for which higher income increases demand






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






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






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






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