Test your basic knowledge |

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






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






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






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






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






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






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






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






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






11. 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






12. The difference between total revenue and total explicit costs






13. 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






14. 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






15. 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






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






17. 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






18. 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.






19. A good for which higher income increases demand






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






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






22. Ed = 0 - no response to price change






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






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






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






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






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






28. 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.






29. The sum of consumer surplus and producer surplus






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






31. Ed > 1 - meaning consumers are price sensitive






32. TR = P * Qd






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






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






35. 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






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






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






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






39. A good for which higher income decreases demand






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






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






42. The difference between the price received and the marginal cost of producing the good. It is the area above the supply curve and under the price






43. 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






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






45. Models where firms agree to mutually improve their situation






46. 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






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






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






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






50. The difference between total revenue and total explicit and implicit costs