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






2. 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.






3. 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






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






5. The difference between total revenue and total explicit costs






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






7. The change in total product resulting from a change in the labor input. MPL = dTPL/dL - or the slope of total product






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






9. Ex -y = (%dQd good X) / (%d Price Y). If Ex -y > 0 - goods X and Y are substitutes. If Ex -y < 0 - goods X and Y are complementary






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






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






12. 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.






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






14. Ed < 1






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






16. 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






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






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






19. 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






20. 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






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






22. 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.






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






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






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






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






27. Excess demand; a shortage exists at a market price when the quantity demanded exceeds the quantity supplied






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






29. Models where firms agree to mutually improve their situation






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






31. Ed = (%dQd)/(%dP). Ignore negative sign






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






33. 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






34. 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






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






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






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






38. AFC = TFC/Q






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






40. 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






41. 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






42. 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






43. 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






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






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






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






47. Ed > 1 - meaning consumers are price sensitive






48. Ed = 1






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






50. A good for which higher income decreases demand