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. 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






2. 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






3. Ed = 1






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






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






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






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






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






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






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






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






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






13. AFC = TFC/Q






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






15. Ei > 1






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






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






18. A good for which higher income decreases demand






19. The difference between total revenue and total explicit costs






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






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






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






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






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






25. TR = P * Qd






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






27. 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






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






29. 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






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






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






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






33. 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






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






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






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






37. 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.






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






39. 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






40. A period of time too short to change the size of the plant - but many other - more variable resources can be changed to meet demand






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






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






43. AVC = TVC/Q






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






45. Pmc < MR = MC and Pmc > minimum ATC so outcome is not efficient - but profit = 0.






46. 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.






47. 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






48. Ed < 1






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






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