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






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






3. 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






4. 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






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






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






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






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






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






10. 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






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






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






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






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






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






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






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






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






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






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






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






22. 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.






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






24. The difference between total revenue and total explicit costs






25. A good for which higher income increases demand






26. Ed = 0 - no response to price change






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






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






29. Ed < 1






30. 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






31. 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






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






33. 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






34. Direct - purchased - out-of-pocket costs paid to resource suppliers provided by the entrepreneur






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






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






37. 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






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






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






40. Models where firms agree to mutually improve their situation






41. 0 < Ei < 1






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. The sum of consumer surplus and producer surplus






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






45. 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






46. AFC = TFC/Q






47. AVC = TVC/Q






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






49. 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






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







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