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






2. 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






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






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






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






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






7. Ei > 1






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






9. 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






10. AVC = TVC/Q






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






12. TR = P * Qd






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






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






15. The lost net benefit to society caused by a movement away from the competitive market equilibrium






16. 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






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






18. 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






19. 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.






20. 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






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






22. 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






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






24. 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






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






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






27. Ed = 1






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






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






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






31. 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.






32. AFC = TFC/Q






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






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






35. Ei = (%dQd good X)/(%d Income)






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






37. The rational decision maker chooses an action if MB = MC






38. The ability to set the price above the perfectly competitive level






39. 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






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






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






42. 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






43. 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






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






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






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






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






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






49. 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






50. 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