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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. TR = P * Qd






2. Measures the cost the firm incurs from using an additional unit of input. In a perfectly competitive labor market - MRC = Wage. In a monopsony labor market - the MRC > Wage






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






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






5. 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.






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






7. 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






8. 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






9. 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






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






11. 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






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






13. 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






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






15. The difference between total revenue and total explicit costs






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






17. The sum of consumer surplus and producer surplus






18. 0 < Ei < 1






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






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






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






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






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






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






25. 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






26. 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






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






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






29. 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.






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






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






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






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






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






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






36. Demand for a resource like labor is derived from the demand for the goods produced by the resource






37. Ei > 1






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






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






40. 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.






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






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






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






44. A good for which higher income decreases demand






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






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






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






48. 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






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






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