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






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






3. 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






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






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






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






7. The practice of selling essentially the same good to different groups of consumers at different prices






8. 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






9. Entry (or exit) of firms does not shift the cost curves of firms in the industry






10. 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






11. 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.






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






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






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






15. Ed = 0 - no response to price change






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






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






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






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






20. AFC = TFC/Q






21. A good for which higher income increases demand






22. 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






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






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






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






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






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






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






29. 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






30. 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






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






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






33. Ed < 1






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






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






36. A per unit tax on production results in a vertical shift in the supply curve by the amount of the tax






37. A good for which higher income decreases demand






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






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






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






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






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






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






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






45. 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






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






47. 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.






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






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






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