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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. Ei = (%dQd good X)/(%d Income)
Income Elasticity
Subsidy
Monopoly
Public goods
2. 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
Marginal tax rate
Cartel
Market Economy (Capitalism)
Monopsonist
3. Ed = (%dQd)/(%dP). Ignore negative sign
Fixed inputs
Unit elastic demand
Price elasticity
Free-Rider Problem
4. The more of a good that is produced - the greater the opportunity cost of producing the next unit of that good
Opportunity Cost
Total Welfare
Specialization
Law of Increasing Costs
5. An economic system based upon the fundamentals of private property - freedom - self-interest - and prices
Market Economy (Capitalism)
Accounting Profit
Resources
Price discrimination
6. Two goods are consumer substitutes if they provide essentially the same utility to consumers
Determinants of Demand
Substitute Goods
Subsidy
Absolute prices
7. ATC = TC/Q = AFC + AVC
Economic Growth
Marginal Benefit (MB)
Average Total Cost (ATC)
Marginal Resource Cost (MRC)
8. A firm that has market power in the factor market (a wage-setter)
Total variable costs (TVC)
Monopsonist
Total Welfare
Marginal Analysis
9. 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
Free-Rider Problem
Shutdown Point
Law of Demand
Non-collusive oligopoly
10. Product demand - productivity - prices of other resources - and complementary resources
Determinants of Labor Demand
Substitution Effect
Monopolistic competition long-run equilibrium
Monopoly long-run equilibrium
11. Excess demand; a shortage exists at a market price when the quantity demanded exceeds the quantity supplied
Shortage
Cross-Price Elasticity of Demand
Demand for Labor
Allocative Efficiency
12. 0 < Ei < 1
Oligopoly
Increasing Cost Industry
Necessity
Opportunity Cost
13. The firm hires the profit maximizing amount of a resource at the point where MRP = MRC
Spillover benefits
Marginal Resource Cost (MRC)
Increasing Cost Industry
Profit Maximizing Resource Employment
14. 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
Dead Weight Loss
Four-firm concentration ratio
Collusive oligopoly
Constant Returns to Scale
15. All firms maximize profit by producing where MR = MC
Luxury
Normal Profit
Normal Goods
Profit Maximizing Rule
16. The number of units of any other good Y that must be sacrificed to acquire good X. Only relative prices matter
Monopoly long-run equilibrium
Variable inputs
Relative Prices
Subsidy
17. 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
Private goods
Specialization
Income Effect
18. MUx / Px = MUy/Py or MUx/MUy = Px/Py
Price elastic demand
Spillover costs
Demand for Labor
Utility Maximizing Rule
19. Substitutes - cost as percentage of income - and time to adjust to price changes all influence price elasticity
Monopoly
Income Elasticity
Determinants of elasticity
Fixed inputs
20. TR = P * Qd
Monopoly long-run equilibrium
Average Total Cost (ATC)
Total Revenue
Constant Returns to Scale
21. 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
Constrained Utility Maximization
Natural Monopoly
Constant cost industry
Derived Demand
22. The case where economies of scale are so extensive that it is less costly for one firm to supply the entire range of demand
Consumer surplus
Normal Goods
Law of Supply
Natural Monopoly
23. AFC = TFC/Q
Perfectly inelastic
Average Fixed Cost (AFC)
Fixed inputs
Public goods
24. Entry of new firms shifts the cost curves for all firms downward
Relative Prices
Absolute Advantage
Decreasing Cost industry
Excise Tax
25. The change in quantity demanded that results from a change in the consumer's purchasing power (or real income)
Least-Cost Rule
Production function
Total variable costs (TVC)
Income Effect
26. Models where firms are competitive rivals seeking to gain at the expense of their rivals
Absolute Advantage
Average Fixed Cost (AFC)
Non-collusive oligopoly
Opportunity Cost
27. Has opposite effect of an excise tax - as it lowers the marginal cost of production - forcing the supply curve down
Subsidy
Market power
Marginal Revenue Product (MRP)
Scarcity
28. Exists when the production of a good imposes disutility upon third parties not directly involved in the consumption or production of the good
Negative externality
Total Product of Labor (TPL)
Short run
Marginal Revenue Product (MRP)
29. The difference between total revenue and total explicit costs
Comparative Advantage
Accounting Profit
Market power
Total variable costs (TVC)
30. 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.
Collusive oligopoly
Cartel
Diseconomies of Scale
Economies of Scale
31. A per unit tax on production results in a vertical shift in the supply curve by the amount of the tax
Substitution Effect
Variable inputs
Total Revenue
Excise Tax
32. Ei > 1
Normal Profit
Derived Demand
Economies of Scale
Luxury
33. 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
Marginal Resource Cost (MRC)
Specialization
Total Fixed Costs (TFC)
Absolute Advantage
34. 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
Determinants of elasticity
Incidence of Tax
Law of Demand
Economics
35. The practice of selling essentially the same good to different groups of consumers at different prices
Non-collusive oligopoly
Surplus
Total variable costs (TVC)
Price discrimination
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
Market power
Price discrimination
Price floor
Perfectly elastic
37. Costs that do not vary with changes in short-run output. They must be paid even when output is zero.
Total Fixed Costs (TFC)
Increasing Cost Industry
Perfectly elastic
Variable inputs
38. Total revenue rises with a price increase if demand is price inelastic and falls with a price increase if demand is price elastic
Incidence of Tax
Total Revenue Test
Perfectly elastic
Scarcity
39. A market structure characterized by a few small firms producing a differentiated product with easy entry into the market
Variable inputs
Monopolistic competition
Average Fixed Cost (AFC)
Substitution Effect
40. The additional benefit received from the consumption of the next unit of a good or service
Incidence of Tax
Productive Efficiency
Marginal Benefit (MB)
Market power
41. 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
Monopolistic competition
Spillover benefits
Consumer surplus
Economies of Scale
42. Production of maximum output for a given level of technology and resources. All points on the PPF are productively efficient
Negative externality
Price elasticity
Consumer surplus
Productive Efficiency
43. 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
Monopoly long-run equilibrium
Marginal Cost (MC)
Productive Efficiency
Law of Increasing Costs
44. 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
Determinants of Labor Demand
Marginal Revenue Product (MRP)
Shutdown Point
Collusive oligopoly
45. Holding all else equal - when the price of a good rises - consumers decrease their quantity demanded for that good
Law of Demand
Explicit costs
Total Fixed Costs (TFC)
Least-Cost Rule
46. The most desirable alternative given up as the result of a decision
Total Welfare
Positive externality
Profit Maximizing Rule
Opportunity Cost
47. When firms focus their resources on production of goods for which they have comparative advantage
Constant cost industry
Dead Weight Loss
Determinants of elasticity
Specialization
48. A period of time long enough to alter the plant size. New firms can enter the industry and existing firms can liquidate and exit
Long Run
Market Economy (Capitalism)
Derived Demand
Implicit costs
49. 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
Producer surplus
Economics
Opportunity Cost
Collusive oligopoly
50. The least competitive market structure - characterized by a single producer - with no close substitutes - barriers to entry - and price making power
Collusive oligopoly
Positive externality
Monopoly long-run equilibrium
Monopoly