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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. 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






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






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






4. 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






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






6. 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






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






8. 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






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






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






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






12. 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.






13. The firm hires the profit maximizing amount of a resource at the point where MRP = MRC






14. 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






15. AVC = TVC/Q






16. 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






17. 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






18. Ei > 1






19. 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






20. 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






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






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






23. 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






24. A good for which higher income decreases demand






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






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






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






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






29. Indirect - non-purchased - or opportunity costs of resources provided by the entrepreneur






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






31. 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






32. 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.






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






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






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






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






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






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






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






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






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






43. 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.






44. 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






45. 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






46. 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






47. The sum of consumer surplus and producer surplus






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






49. 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






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