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AP Microeconomics

Subjects : economics, ap
Instructions:
  • Answer 50 questions in 15 minutes.
  • If you are not ready to take this test, you can study here.
  • 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. Production inputs that cannot be changed in the short run. Usually this is the plant size or capital






2. 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






3. 0 < Ei < 1






4. The output where AVC is minimized. If the price falls below this point - the firm chooses to shut down or produce zero units in the short run






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






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






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






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






9. 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






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






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






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






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






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






15. Ed > 1 - meaning consumers are price sensitive






16. 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.






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






18. 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






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






20. 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






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






22. Ei > 1






23. 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






24. 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






25. 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






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






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






28. Costs that do not vary with changes in short-run output. They must be paid even when output is zero.






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






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






31. 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






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






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






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






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






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






37. 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






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






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






40. Ed = 0 - no response to price change






41. AFC = TFC/Q






42. Ed < 1






43. Occurs when LRAC is constant over a variety of plant sizes






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






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






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






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






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






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






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