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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. An economic system based upon the fundamentals of private property - freedom - self-interest - and prices






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






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






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






5. Another way of saying that firms are earning zero economic profits or a fair rate of return on invested resources






6. The difference between total revenue and total explicit costs






7. The sum of consumer surplus and producer surplus






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






9. 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






10. TR = P * Qd






11. A good for which higher income increases demand






12. 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






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






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






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






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






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






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






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






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






21. ATC = TC/Q = AFC + AVC






22. 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






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






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






25. 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






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






27. 0 < Ei < 1






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






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. 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






31. 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






32. Ed = 1






33. 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






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






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






36. Ei > 1






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






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






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






40. 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






41. Ed < 1






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






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






44. Ed = 0 - no response to price change






45. 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






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






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






48. 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






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






50. A group of firms that agree not to compete with each other on the basis of price - production - or other competitive dimensions. Cartel members operate as a monopolist to maximize their joint profits