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






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






3. Ed = 0 - no response to price change






4. 0 < Ei < 1






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






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






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






8. 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






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






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






11. ATC = TC/Q = AFC + AVC






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






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






14. The sum of consumer surplus and producer surplus






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






16. Ed > 1 - meaning consumers are price sensitive






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






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






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






20. 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






21. 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






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






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






24. A good for which higher income decreases demand






25. 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






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






27. 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






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






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






31. 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






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






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






34. AFC = TFC/Q






35. 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.






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






37. Ei > 1






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






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






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






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






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






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






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






45. 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






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






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






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






49. Ed = 1






50. 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