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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. 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






2. The sum of consumer surplus and producer surplus






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






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






6. A good for which higher income decreases demand






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






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






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






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






11. 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.






12. 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






13. 0 < Ei < 1






14. A period of time too short to change the size of the plant - but many other - more variable resources can be changed to meet demand






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






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






17. ATC = TC/Q = AFC + AVC






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






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






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






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






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






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






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






25. AVC = TVC/Q






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






27. 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






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






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. 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






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






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






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






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






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






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






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






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






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






40. A good for which higher income increases demand






41. 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






42. The firm hires the profit maximizing amount of a resource at the point where MRP = MRC






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






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






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






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






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






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






49. Indirect - non-purchased - or opportunity costs of resources provided by the entrepreneur






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