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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. The sum of consumer surplus and producer surplus






2. A firm that has market power in the factor market (a wage-setter)






3. The change in quantity demanded resulting from a change in the price of one good relative to other goods






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






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






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






7. Es = (%dQs) / (%dPrice)






8. Ed = 1






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






10. 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






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






12. 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






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






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






15. 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






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






17. The case where economies of scale are so extensive that it is less costly for one firm to supply the entire range of demand






18. 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






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






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






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






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






23. 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






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






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






26. Characterized by many small price-taking firms producing a standardized product in an industry in which there are no barriers to entry or exit






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






28. Holding all else equal - when the price of a good rises - suppliers increase their quantity supplied for that good






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






30. 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






31. 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






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






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






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






35. Ed = 0 - no response to price change






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 = 8 - infinite change in demand to price change






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






39. 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






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






41. A good for which higher income decreases demand






42. 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






43. 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






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






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






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






47. 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






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






49. 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






50. AVC = TVC/Q