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






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






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






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






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






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






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






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






9. 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






10. The sum of consumer surplus and producer surplus






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






12. 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






13. 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






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






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






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






17. The difference between total revenue and total explicit costs






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






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






20. Labor demand for the firm is MRPL curve. The labor demanded for the entire market DL = ?MRPL of all firms






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






22. 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






23. A good for which higher income decreases demand






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






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






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






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






28. The change in total product resulting from a change in the labor input. MPL = dTPL/dL - or the slope of total product






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






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






31. 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.






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






33. Ed = 1






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






35. 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






36. 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






37. Ed > 1 - meaning consumers are price sensitive






38. Product demand - productivity - prices of other resources - and complementary resources






39. 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.






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






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






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






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






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






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






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






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






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






49. Ei > 1






50. 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







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