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






2. 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






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






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






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






6. 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






7. Ed = 0 - no response to price change






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






9. 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






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






11. Consumer income - prices of substitute and complementary goods - consumer tastes and preferences - consumer speculation - and number of buyers in the market all influence demand






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






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






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






15. 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






16. 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






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






18. Ed = 1






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






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






21. 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






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






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






24. A good for which higher income increases demand






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






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






27. 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






28. 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.






29. 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






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






31. 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.






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






33. Ed < 1






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






35. 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






36. 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






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






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






39. 0 < Ei < 1






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






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






42. The sum of consumer surplus and producer surplus






43. 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






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






45. Exists when the production of a good creates utility for third parties not directly involved in the consumption of production of the good






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






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






48. 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






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






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