Test your basic knowledge |

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






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






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






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






5. 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






6. 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






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






8. 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






9. 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






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






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






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






15. 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






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






17. 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






18. TR = P * Qd






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






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






21. 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






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






23. 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






24. The sum of consumer surplus and producer surplus






25. The rational decision maker chooses an action if MB = MC






26. Ed < 1






27. 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






28. AVC = TVC/Q






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






30. 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






31. Demand for a resource like labor is derived from the demand for the goods produced by the resource






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






33. The difference between total revenue and total explicit costs






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






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






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






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






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






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






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






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






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






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






44. 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






45. 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






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






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






48. 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






49. 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.






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