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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. 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






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






3. 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






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






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






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






7. 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






8. AFC = TFC/Q






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






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






11. Two goods are consumer substitutes if they provide essentially the same utility to consumers






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






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






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






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






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






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






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






19. 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






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






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






22. Holding all else equal - when the price of a good rises - suppliers increase their quantity supplied for that good






23. 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






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






25. Ed < 1






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






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






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






29. Ed > 1 - meaning consumers are price sensitive






30. 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






31. 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.






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






33. ATC = TC/Q = AFC + AVC






34. 0 < Ei < 1






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






36. 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






37. Ed = 1






38. 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






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






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 price received and the marginal cost of producing the good. It is the area above the supply curve and under the price






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






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






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






45. 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






46. TR = P * Qd






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






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






49. 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






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