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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 output where ATC is minimized and economic profit is zero






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






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






4. 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






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






6. Ei > 1






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






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






9. The sum of consumer surplus and producer surplus






10. 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






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






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






13. 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






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






15. 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






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






17. A good for which higher income decreases demand






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






19. AVC = TVC/Q






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






21. 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






22. The difference between total revenue and total explicit costs






23. 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






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






25. 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






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






27. 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






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






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






30. 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






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






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






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






34. Models where firms agree to mutually improve their situation






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






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






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






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






39. Occurs when LRAC is constant over a variety of plant sizes






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






41. Ed = 1






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






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






44. 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.






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






46. 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






47. 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






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






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






50. 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