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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. Factors of production - 4 categories: labor - physical capital - land/natural resources - and entrepreneurial ability






2. A good for which higher income increases demand






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






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






5. Ed = 8 - infinite change in demand to price change






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






7. The additional benefit received from the consumption of the next unit of a good or service






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






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






10. TR = P * Qd






11. 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






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






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






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






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






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






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






19. 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






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






21. 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






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






23. 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






24. 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






25. 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






26. 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






27. Ed < 1






28. Ed = 0 - no response to price change






29. Direct - purchased - out-of-pocket costs paid to resource suppliers provided by the entrepreneur






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






31. 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






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






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






34. 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






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. Pmc < MR = MC and Pmc > minimum ATC so outcome is not efficient - but profit = 0.






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






38. 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






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






40. Costs that do not vary with changes in short-run output. They must be paid even when output is zero.






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






42. 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






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






44. Ed = 1






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






46. 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






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






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






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






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