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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.
  • 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. Es = (%dQs) / (%dPrice)






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






3. A period of time long enough to alter the plant size. New firms can enter the industry and existing firms can liquidate and exit






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






5. Total product divided by labor employed. APL = TPL/L






6. TR = P * Qd






7. 0 < Ei < 1






8. Ed > 1 - meaning consumers are price sensitive






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






10. 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






11. The difference between total revenue and total explicit costs






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






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






14. Ei > 1






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






16. Ed = 0 - no response to price change






17. A good for which higher income increases demand






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






19. A good for which higher income decreases demand






20. 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






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






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






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






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






26. 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






27. 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






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






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






30. 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






31. Models where firms are competitive rivals seeking to gain at the expense of their rivals






32. 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






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






34. 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






35. Goods that are both rival and excludable. Only one person can consume the good at a time and consumers who do not pay for the good are excluded from consumption






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






37. 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






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






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






40. The more of a good that is produced - the greater the opportunity cost of producing the next unit of that good






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






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






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






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






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






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






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






48. Ed = 1






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






50. AVC = TVC/Q