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Test your basic knowledge |
AP Microeconomics
Start Test
Study First
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. Costs that do not vary with changes in short-run output. They must be paid even when output is zero.
Law of Increasing Costs
Total Fixed Costs (TFC)
Average Product of Labor (APL)
Absolute prices
2. The additional benefit received from the consumption of the next unit of a good or service
Implicit costs
Average Total Cost (ATC)
Cross-Price Elasticity of Demand
Marginal Benefit (MB)
3. Entry of new firms shifts the cost curves for all firms downward
Comparative Advantage
Relative Prices
Derived Demand
Decreasing Cost industry
4. 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
Long Run
Price floor
Surplus
Marginal Analysis
5. The rational decision maker chooses an action if MB = MC
Total Revenue Test
Consumer surplus
Excess Capacity
Marginal Analysis
6. The firm hires the profit maximizing amount of a resource at the point where MRP = MRC
Diseconomies of Scale
Perfectly inelastic
Absolute prices
Profit Maximizing Resource Employment
7. A good for which higher income decreases demand
Least-Cost Rule
Inferior Goods
Absolute Advantage
Price floor
8. The least competitive market structure - characterized by a single producer - with no close substitutes - barriers to entry - and price making power
Monopoly
Perfectly competitive long-run equilibrium
Price Elasticity of Supply
Constant Returns to Scale
9. Total product divided by labor employed. APL = TPL/L
Average Product of Labor (APL)
Positive externality
Law of Demand
Marginal Product of Labor (MPL)
10. Another way of saying that firms are earning zero economic profits or a fair rate of return on invested resources
Diseconomies of Scale
Consumer surplus
Normal Profit
Unit elastic demand
11. Holding all else equal - when the price of a good rises - suppliers increase their quantity supplied for that good
Collusive oligopoly
Law of Supply
Spillover benefits
Marginal Benefit (MB)
12. ATC = TC/Q = AFC + AVC
Average Total Cost (ATC)
Law of Increasing Costs
Negative externality
Comparative Advantage
13. Product demand - productivity - prices of other resources - and complementary resources
Price elasticity
Spillover benefits
Determinants of Labor Demand
Law of Supply
14. 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
Allocative Efficiency
Excess Capacity
Market power
Spillover costs
15. All firms maximize profit by producing where MR = MC
Private goods
Profit Maximizing Rule
Economic Profit
Law of Supply
16. 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
Economic Profit
Demand for Labor
Determinants of Supply
Decreasing Cost industry
17. The output where ATC is minimized and economic profit is zero
Break-even Point
Opportunity Cost
Implicit costs
Average Variable Cost (AVC)
18. Ed > 1 - meaning consumers are price sensitive
Opportunity Cost
Accounting Profit
Price elastic demand
Economic Growth
19. AFC = TFC/Q
Natural Monopoly
Perfectly competitive long-run equilibrium
Average Fixed Cost (AFC)
Public goods
20. Characterized by many small price-taking firms producing a standardized product in an industry in which there are no barriers to entry or exit
Perfect competition
Total variable costs (TVC)
Explicit costs
Public goods
21. Occurs when there is no more incentive for firms to enter or exit. P=MR=MC=ATC and profit = 0
Price Ceiling
Marginal tax rate
Perfectly competitive long-run equilibrium
Perfectly elastic
22. The additional cost incurred from the consumption of the next unit of a good or a service
Marginal Cost (MC)
Marginal tax rate
Market Equilibrium
Market power
23. 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
Total Welfare
Allocative Efficiency
Perfectly elastic
Determinants of Supply
24. 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
Economies of Scale
Marginal Resource Cost (MRC)
Scarcity
Price floor
25. A market structure characterized by a few small firms producing a differentiated product with easy entry into the market
Scarcity
Diseconomies of Scale
Perfectly elastic
Monopolistic competition
26. Exists when the production of a good creates utility for third parties not directly involved in the consumption of production of the good
Income Elasticity
Law of Supply
Profit Maximizing Resource Employment
Positive externality
27. A good for which higher income increases demand
Normal Goods
Spillover benefits
Collusive oligopoly
Monopoly long-run equilibrium
28. 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
Least-Cost Rule
Collusive oligopoly
Excess Capacity
Economic Profit
29. The case where economies of scale are so extensive that it is less costly for one firm to supply the entire range of demand
Total Welfare
Natural Monopoly
Non-collusive oligopoly
Price Ceiling
30. 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.
Cartel
Four-firm concentration ratio
Market Equilibrium
Diseconomies of Scale
31. Holding all else equal - when the price of a good rises - consumers decrease their quantity demanded for that good
Demand for Labor
Law of Demand
Monopoly
Explicit costs
32. TR = P * Qd
Break-even Point
Total Revenue
Excess Capacity
Normal Profit
33. Pmc < MR = MC and Pmc > minimum ATC so outcome is not efficient - but profit = 0.
Total Product of Labor (TPL)
Monopolistic competition long-run equilibrium
Unit elastic demand
Market Economy (Capitalism)
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
Price Ceiling
Economic Profit
Inferior Goods
Derived Demand
35. 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
Short run
Normal Profit
Price discrimination
Total Revenue Test
36. The ability to set the price above the perfectly competitive level
Excess Capacity
Constant cost industry
Market power
Constrained Utility Maximization
37. The difference between total revenue and total explicit and implicit costs
Substitute Goods
Total Product of Labor (TPL)
Necessity
Economic Profit
38. The practice of selling essentially the same good to different groups of consumers at different prices
Market Economy (Capitalism)
Price discrimination
Negative externality
Total Fixed Costs (TFC)
39. When firms focus their resources on production of goods for which they have comparative advantage
Free-Rider Problem
Price Ceiling
Specialization
Law of Diminishing Marginal Utility
40. 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
Marginal tax rate
Constant Returns to Scale
Marginal Cost (MC)
Price elasticity
41. AVC = TVC/Q
Average Variable Cost (AVC)
Monopoly
Price Elasticity of Supply
Cross-Price Elasticity of Demand
42. 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
Shutdown Point
Monopolistic competition long-run equilibrium
Cross-Price Elasticity of Demand
Total Fixed Costs (TFC)
43. 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
Variable inputs
Monopoly long-run equilibrium
Unit elastic demand
Profit Maximizing Rule
44. 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
Opportunity Cost
Total Fixed Costs (TFC)
Producer surplus
Perfectly inelastic
45. The marginal utility from consumption of more and more of that item falls over time
Law of Diminishing Marginal Utility
Variable inputs
Incidence of Tax
Resources
46. Exists if a producer can produce a good at lower opportunity cost than all other producers
Comparative Advantage
Determinants of elasticity
Decreasing Cost industry
Economic Growth
47. The lost net benefit to society caused by a movement away from the competitive market equilibrium
Dead Weight Loss
Shortage
Marginal Analysis
Break-even Point
48. 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.
Marginal Revenue Product (MRP)
Absolute Advantage
Resources
Positive externality
49. Occurs when LRAC is constant over a variety of plant sizes
Constant Returns to Scale
Price inelastic demand
Spillover benefits
Perfect competition
50. 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
Absolute Advantage
Total Revenue
Incidence of Tax
Opportunity Cost