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






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






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






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






5. 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






6. Exists if a producer can produce more of a good than all other producers






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






8. 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






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






10. 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






11. An economic system based upon the fundamentals of private property - freedom - self-interest - and prices






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






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






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






15. 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






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






17. Exists at the point where the quantity supplied equals the quantity demanded






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






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






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






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






22. Ed = 0 - no response to price change






23. 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






24. The sum of consumer surplus and producer surplus






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






26. 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






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






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






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






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






31. When firms focus their resources on production of goods for which they have comparative advantage






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






33. 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






34. 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






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






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






37. 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






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






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






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






41. 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






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






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






44. A good for which higher income increases demand






45. AVC = TVC/Q






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






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






48. 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






49. 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.






50. 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