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






2. 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






3. A good for which higher income increases demand






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






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






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






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






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






9. AFC = TFC/Q






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






11. 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






12. Has opposite effect of an excise tax - as it lowers the marginal cost of production - forcing the supply curve down






13. A firm that has market power in the factor market (a wage-setter)






14. Ed = 0 - no response to price change






15. Exists at the point where the quantity supplied equals the quantity demanded






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






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






18. 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






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






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. 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






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






23. 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






24. The difference between total revenue and total explicit costs






25. Another way of saying that firms are earning zero economic profits or a fair rate of return on invested resources






26. 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






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






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






29. A legal maximum price above which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent shortage






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






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






32. 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






33. 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






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






35. Ei > 1






36. Ed = 1






37. AVC = TVC/Q






38. Es = (%dQs) / (%dPrice)






39. ATC = TC/Q = AFC + AVC






40. 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






41. 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.






42. Models where firms agree to mutually improve their situation






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






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






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






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






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






48. The study of how people - firms - and societies use their scarce productive resources to best satisfy their unlimited material wants.






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






50. A good for which higher income decreases demand