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






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






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






4. 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






5. 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.






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






7. Exists if a producer can produce a good at lower opportunity cost than all other producers






8. 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






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






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






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






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






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






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






15. 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






16. Ed = 1






17. 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






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






19. The philosophy that a citizen should receive a share of economic resources proportional to the marginal revenue product of his or her productivity






20. 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






21. The total quantity - or total output of a good produced at each quantity of labor employed






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






23. 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






24. 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






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






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






27. 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






28. Ei > 1






29. 0 < Ei < 1






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






31. TR = P * Qd






32. The number of units of any other good Y that must be sacrificed to acquire good X. Only relative prices matter






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






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






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






36. 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






37. 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






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






39. A good for which higher income decreases demand






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






41. 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






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






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






44. The imbalance between limited productive resources and unlimited human wants






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






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






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






48. 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






49. 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.






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