Test your basic knowledge |

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. 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.






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






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






4. 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






5. Ed < 1






6. 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






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






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






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






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






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






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






13. Exists when the production of a good creates utility for third parties not directly involved in the consumption of production of the good






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






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






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






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






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






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






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






21. 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






22. Models where firms agree to mutually improve their situation






23. A good for which higher income increases demand






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






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






26. The upward part of the LRAC curve where LRAC rises as plant size increases. This is usually the result of the increased difficulty of managing larger firms - which results in lost efficiency and rising per unit costs.






27. 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






28. 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






29. A good for which higher income decreases demand






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






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






32. AVC = TVC/Q






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






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






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






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






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






38. 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






39. The output where ATC is minimized and economic profit is zero






40. 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






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






42. 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






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






44. 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






45. 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






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






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






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






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






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