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






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






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






4. A good for which higher income decreases demand






5. A good for which higher income increases demand






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






7. 0 < Ei < 1






8. Excess supply; exists at a market price when the quantity supplied exceeds the quantity demanded.






9. 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






10. AFC = TFC/Q






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






12. 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.






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






15. Occurs when LRAC is constant over a variety of plant sizes






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






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






18. TR = P * Qd






19. The additional benefit received from the consumption of the next unit of a good or service






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






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






22. 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






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






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






25. Ed < 1






26. 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






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






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






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






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






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






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






33. 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






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






35. 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






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






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






38. 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






39. 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






40. Ei > 1






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






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






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






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






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






46. 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






47. 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






48. Characterized by many small price-taking firms producing a standardized product in an industry in which there are no barriers to entry or exit






49. 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






50. The difference between total revenue and total explicit costs