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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 output where ATC is minimized and economic profit is zero






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






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






4. 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






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






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






7. 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






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






9. 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






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






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






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






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






14. MUx / Px = MUy/Py or MUx/MUy = Px/Py






15. The marginal utility from consumption of more and more of that item falls over time






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






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






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






19. 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






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






21. 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






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






23. 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






24. 0 < Ei < 1






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






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






27. 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






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






29. The difference between your willingness to pay and the price you actually pay. It is the area below the demand curve and above the price






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






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






32. Ed = 1






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






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






35. 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






36. Ed < 1






37. 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






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






39. 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






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






41. Holding all else equal - when the price of a good rises - suppliers increase their quantity supplied for that good






42. 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






43. Ed = 0 - no response to price change






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






45. TR = P * Qd






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. The price of a good measured in units of currency






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






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






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