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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. 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






2. The philosophy that a citizen should receive a share of economic resources proportional to the marginal revenue product of his or her productivity






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






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






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






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






7. Direct - purchased - out-of-pocket costs paid to resource suppliers provided by the entrepreneur






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






9. 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






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






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






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






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






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






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






16. Ed < 1






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






18. 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






19. AVC = TVC/Q






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






21. Pm > MR = MC - which is not allocatively efficient and dead weight loss exists. Pm > ATC - which is not productively efficient. Profit > 0 so consumer surplus is transferred to the monopolist as profit






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






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






24. 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






25. 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






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






27. 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






28. The sum of consumer surplus and producer surplus






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






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






31. Ed = 1






32. 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






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






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






35. 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






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






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






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






39. 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






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






41. 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






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






43. 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






44. Substitutes - cost as percentage of income - and time to adjust to price changes all influence price elasticity






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






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






47. 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






48. 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






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






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