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Test your basic knowledge |
AP Microeconomics
Start Test
Study First
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 philosophy that a citizen should receive a share of economic resources proportional to the marginal revenue product of his or her productivity
Marginal Productivity Theory
Cartel
Economics
Explicit costs
2. 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
Oligopoly
Profit Maximizing Rule
Natural Monopoly
Producer surplus
3. A period of time long enough to alter the plant size. New firms can enter the industry and existing firms can liquidate and exit
Substitute Goods
Total Welfare
Long Run
Total Product of Labor (TPL)
4. Costs of inputs - technology and productivity - taxes/subsidies - producer speculation - price of other goods that could be produced - and number of sellers all influence supply
Determinants of Supply
Perfect competition
Absolute prices
Perfectly competitive long-run equilibrium
5. The change in quantity demanded that results from a change in the consumer's purchasing power (or real income)
Marginal Product of Labor (MPL)
Income Effect
Production function
Short run
6. The difference between total revenue and total explicit and implicit costs
Substitution Effect
Economic Profit
Constant Returns to Scale
Determinants of Labor Demand
7. The more of a good that is produced - the greater the opportunity cost of producing the next unit of that good
Marginal tax rate
Law of Increasing Costs
Monopolistic competition
Public goods
8. The rational decision maker chooses an action if MB = MC
Demand for Labor
Market Economy (Capitalism)
Marginal Analysis
Decreasing Cost industry
9. 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.
Inferior Goods
Marginal Revenue Product (MRP)
Economic Growth
Shortage
10. A good for which higher income decreases demand
Inferior Goods
Four-firm concentration ratio
Normal Profit
Income Effect
11. The additional cost incurred from the consumption of the next unit of a good or a service
Marginal Revenue Product (MRP)
Marginal Cost (MC)
Allocative Efficiency
Total Revenue
12. Occurs when an economy's production possibilities increase. This can be a result of more resources - better resources - or improvements in technology.
Perfect competition
Economic Growth
Scarcity
Profit Maximizing Resource Employment
13. 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.
Incidence of Tax
Negative externality
Diseconomies of Scale
Perfectly competitive long-run equilibrium
14. Exists if a producer can produce more of a good than all other producers
Subsidy
Market power
Absolute Advantage
Normal Profit
15. The additional benefit received from the consumption of the next unit of a good or service
Price elastic demand
Law of Supply
Total Revenue Test
Marginal Benefit (MB)
16. AVC = TVC/Q
Average Variable Cost (AVC)
Marginal Revenue Product (MRP)
Least-Cost Rule
Monopoly long-run equilibrium
17. A market structure characterized by a few small firms producing a differentiated product with easy entry into the market
Constant cost industry
Monopolistic competition
Negative externality
Comparative Advantage
18. Pmc < MR = MC and Pmc > minimum ATC so outcome is not efficient - but profit = 0.
Monopolistic competition long-run equilibrium
Demand for Labor
Monopoly
Marginal Resource Cost (MRC)
19. 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
Surplus
Income Effect
Average Fixed Cost (AFC)
Monopoly long-run equilibrium
20. Entry of new firms shifts the cost curves for all firms downward
Decreasing Cost industry
Cross-Price Elasticity of Demand
Free-Rider Problem
Market Economy (Capitalism)
21. 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
Average Total Cost (ATC)
Variable inputs
Substitute Goods
Dead Weight Loss
22. 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
Constant cost industry
Monopoly long-run equilibrium
Least-Cost Rule
Price inelastic demand
23. Holding all else equal - when the price of a good rises - suppliers increase their quantity supplied for that good
Collusive oligopoly
Law of Demand
Price elastic demand
Law of Supply
24. The most desirable alternative given up as the result of a decision
Opportunity Cost
Free-Rider Problem
Marginal Productivity Theory
Determinants of Labor Demand
25. Ei = (%dQd good X)/(%d Income)
Marginal Analysis
Income Elasticity
Marginal Revenue Product (MRP)
Implicit costs
26. 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
Total Fixed Costs (TFC)
Spillover benefits
Total Revenue Test
Constant Returns to Scale
27. 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
Private goods
Market Economy (Capitalism)
Public goods
Four-firm concentration ratio
28. Labor demand for the firm is MRPL curve. The labor demanded for the entire market DL = ?MRPL of all firms
Demand for Labor
Excess Capacity
Price elastic demand
Positive externality
29. ATC = TC/Q = AFC + AVC
Dead Weight Loss
Monopolistic competition
Relative Prices
Average Total Cost (ATC)
30. 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
Total Revenue
Cartel
Normal Goods
Variable inputs
31. Holding all else equal - when the price of a good rises - consumers decrease their quantity demanded for that good
Marginal Revenue Product (MRP)
Law of Supply
Public goods
Law of Demand
32. The imbalance between limited productive resources and unlimited human wants
Economic Growth
Total Welfare
Production function
Scarcity
33. Costs that do not vary with changes in short-run output. They must be paid even when output is zero.
Total Fixed Costs (TFC)
Average Product of Labor (APL)
Marginal Product of Labor (MPL)
Cartel
34. The difference between the monopolistic competition output Qmc and the output at minimum ATC. Excess capacity is underused plant and equipment
Total Welfare
Excess Capacity
Profit Maximizing Rule
Perfectly inelastic
35. Indirect - non-purchased - or opportunity costs of resources provided by the entrepreneur
Implicit costs
Private goods
Least-Cost Rule
Law of Demand
36. The sum of consumer surplus and producer surplus
Substitute Goods
Price Ceiling
Total Welfare
Price elastic demand
37. The marginal utility from consumption of more and more of that item falls over time
Utility Maximizing Rule
Law of Diminishing Marginal Utility
Necessity
Luxury
38. Costs that change with the level of output. If output is zero - so are TVCs.
Total variable costs (TVC)
Law of Diminishing Marginal Utility
Inferior Goods
Perfect competition
39. Total product divided by labor employed. APL = TPL/L
Constant Returns to Scale
Surplus
Relative Prices
Average Product of Labor (APL)
40. Ed = (%dQd)/(%dP). Ignore negative sign
Least-Cost Rule
Price elasticity
Total Welfare
Excise Tax
41. Excess supply; exists at a market price when the quantity supplied exceeds the quantity demanded.
Price Ceiling
Cross-Price Elasticity of Demand
Surplus
Fixed inputs
42. 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
Diseconomies of Scale
Price Elasticity of Supply
Short run
Inferior Goods
43. Occurs when LRAC is constant over a variety of plant sizes
Positive externality
Market Economy (Capitalism)
Constant Returns to Scale
Income Effect
44. Exists if a producer can produce a good at lower opportunity cost than all other producers
Comparative Advantage
Necessity
Law of Demand
Non-collusive oligopoly
45. The price of a good measured in units of currency
Long Run
Absolute prices
Increasing Cost Industry
Luxury
46. Characterized by many small price-taking firms producing a standardized product in an industry in which there are no barriers to entry or exit
Perfect competition
Explicit costs
Price Elasticity of Supply
Determinants of Demand
47. The number of units of any other good Y that must be sacrificed to acquire good X. Only relative prices matter
Unit elastic demand
Relative Prices
Diseconomies of Scale
Comparative Advantage
48. 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
Spillover benefits
Public goods
Law of Increasing Costs
Derived Demand
49. Another way of saying that firms are earning zero economic profits or a fair rate of return on invested resources
Incidence of Tax
Demand for Labor
Normal Profit
Explicit costs
50. 0 < Ei < 1
Perfect competition
Determinants of Labor Demand
Necessity
Surplus