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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. 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






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






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






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






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






6. 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






7. Production inputs that cannot be changed in the short run. Usually this is the plant size or capital






8. The sum of consumer surplus and producer surplus






9. The imbalance between limited productive resources and unlimited human wants






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






11. AVC = TVC/Q






12. 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






13. 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.






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






15. 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






16. Models where firms agree to mutually improve their situation






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






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






19. A good for which higher income increases demand






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






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






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






23. TR = P * Qd






24. 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






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






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






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






28. Ed = 0 - no response to price change






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






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






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






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






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






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






35. 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






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






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






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






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






41. 0 < Ei < 1






42. A good for which higher income decreases demand






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






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






45. 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






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






47. 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






48. 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






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






50. 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