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Test your basic knowledge |
AP Microeconomics
Start Test
Study First
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. Es = (%dQs) / (%dPrice)
Average Total Cost (ATC)
Profit Maximizing Resource Employment
Price Elasticity of Supply
Excess Capacity
2. Ed > 1 - meaning consumers are price sensitive
Price elastic demand
Law of Demand
Non-collusive oligopoly
Variable inputs
3. 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
Monopolistic competition long-run equilibrium
Cartel
Production function
Marginal tax rate
4. 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
Four-firm concentration ratio
Scarcity
Spillover costs
Implicit costs
5. The firm hires the profit maximizing amount of a resource at the point where MRP = MRC
Marginal Product of Labor (MPL)
Profit Maximizing Resource Employment
Diseconomies of Scale
Productive Efficiency
6. Two goods are consumer substitutes if they provide essentially the same utility to consumers
Scarcity
Substitute Goods
Total variable costs (TVC)
Price Elasticity of Supply
7. 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
Variable inputs
Economics
Market Economy (Capitalism)
Excise Tax
8. Total revenue rises with a price increase if demand is price inelastic and falls with a price increase if demand is price elastic
Marginal Analysis
Total Revenue Test
Average Fixed Cost (AFC)
Monopoly
9. Characterized by many small price-taking firms producing a standardized product in an industry in which there are no barriers to entry or exit
Consumer surplus
Perfect competition
Subsidy
Comparative Advantage
10. Product demand - productivity - prices of other resources - and complementary resources
Economies of Scale
Economics
Variable inputs
Determinants of Labor Demand
11. Exists if a producer can produce a good at lower opportunity cost than all other producers
Marginal Productivity Theory
Comparative Advantage
Economic Growth
Shutdown Point
12. The difference between the monopolistic competition output Qmc and the output at minimum ATC. Excess capacity is underused plant and equipment
Private goods
Excess Capacity
Absolute Advantage
Spillover costs
13. Costs that change with the level of output. If output is zero - so are TVCs.
Total Revenue
Total variable costs (TVC)
Necessity
Substitute Goods
14. Excess demand; a shortage exists at a market price when the quantity demanded exceeds the quantity supplied
Perfectly competitive long-run equilibrium
Shortage
Spillover benefits
Incidence of Tax
15. 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
Constrained Utility Maximization
Income Elasticity
Accounting Profit
Determinants of elasticity
16. The most desirable alternative given up as the result of a decision
Scarcity
Opportunity Cost
Constant Returns to Scale
Monopolistic competition long-run equilibrium
17. A good for which higher income increases demand
Income Elasticity
Normal Goods
Opportunity Cost
Increasing Cost Industry
18. The difference between total revenue and total explicit costs
Utility Maximizing Rule
Complementary Goods
Accounting Profit
Cross-Price Elasticity of Demand
19. 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
Income Elasticity
Consumer surplus
Total Product of Labor (TPL)
Spillover benefits
20. 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
Producer surplus
Economic Growth
Law of Increasing Costs
Absolute Advantage
21. Ei = (%dQd good X)/(%d Income)
Specialization
Demand for Labor
Average Product of Labor (APL)
Income Elasticity
22. 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
Perfectly competitive long-run equilibrium
Dead Weight Loss
Short run
Marginal Resource Cost (MRC)
23. When firms focus their resources on production of goods for which they have comparative advantage
Monopolistic competition long-run equilibrium
Public goods
Specialization
Spillover costs
24. 0 < Ei < 1
Marginal tax rate
Scarcity
Necessity
Monopolistic competition
25. The ability to set the price above the perfectly competitive level
Implicit costs
Market power
Dead Weight Loss
Total Fixed Costs (TFC)
26. Another way of saying that firms are earning zero economic profits or a fair rate of return on invested resources
Price Ceiling
Law of Diminishing Marginal Utility
Price floor
Normal Profit
27. 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
Price floor
Income Elasticity
Comparative Advantage
Inferior Goods
28. 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
Market Economy (Capitalism)
Allocative Efficiency
Accounting Profit
Break-even Point
29. 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
Constrained Utility Maximization
Law of Supply
Cartel
Collusive oligopoly
30. The marginal utility from consumption of more and more of that item falls over time
Unit elastic demand
Perfect competition
Implicit costs
Law of Diminishing Marginal Utility
31. Entry of new firms shifts the cost curves for all firms upward
Perfectly competitive long-run equilibrium
Non-collusive oligopoly
Market Economy (Capitalism)
Increasing Cost Industry
32. The more of a good that is produced - the greater the opportunity cost of producing the next unit of that good
Marginal Resource Cost (MRC)
Marginal Cost (MC)
Law of Increasing Costs
Law of Demand
33. Exists when the production of a good creates utility for third parties not directly involved in the consumption of production of the good
Positive externality
Economies of Scale
Average Product of Labor (APL)
Luxury
34. The practice of selling essentially the same good to different groups of consumers at different prices
Accounting Profit
Decreasing Cost industry
Shortage
Price discrimination
35. 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
Determinants of Demand
Monopoly long-run equilibrium
Incidence of Tax
Price Elasticity of Supply
36. 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
Monopolistic competition
Public goods
Negative externality
Spillover costs
37. Entry of new firms shifts the cost curves for all firms downward
Substitute Goods
Decreasing Cost industry
Total Product of Labor (TPL)
Long Run
38. All firms maximize profit by producing where MR = MC
Allocative Efficiency
Inferior Goods
Profit Maximizing Rule
Break-even Point
39. 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
Monopolistic competition
Market Economy (Capitalism)
Shortage
Least-Cost Rule
40. Indirect - non-purchased - or opportunity costs of resources provided by the entrepreneur
Constant Returns to Scale
Implicit costs
Dead Weight Loss
Total variable costs (TVC)
41. TR = P * Qd
Average Total Cost (ATC)
Total Revenue
Marginal Resource Cost (MRC)
Fixed inputs
42. Exists if a producer can produce more of a good than all other producers
Shutdown Point
Long Run
Absolute Advantage
Resources
43. 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
Consumer surplus
Average Fixed Cost (AFC)
Comparative Advantage
Price Ceiling
44. 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
Least-Cost Rule
Marginal Cost (MC)
Surplus
Determinants of Supply
45. The number of units of any other good Y that must be sacrificed to acquire good X. Only relative prices matter
Relative Prices
Shortage
Determinants of Demand
Collusive oligopoly
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
Normal Profit
Marginal Revenue Product (MRP)
Natural Monopoly
Shutdown Point
47. The difference between your willingness to pay and the price you actually pay. It is the area below the demand curve and above the price
Law of Demand
Monopoly
Consumer surplus
Marginal Cost (MC)
48. Holding all else equal - when the price of a good rises - consumers decrease their quantity demanded for that good
Luxury
Economic Growth
Complementary Goods
Law of Demand
49. Exists at the point where the quantity supplied equals the quantity demanded
Market Equilibrium
Constant Returns to Scale
Oligopoly
Income Elasticity
50. A market structure characterized by a few small firms producing a differentiated product with easy entry into the market
Monopolistic competition
Long Run
Negative externality
Economies of Scale