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






2. A very diverse market structure characterized by a small number of interdependent large firms - producing a standardized or differentiated product in a market with a barrier to entry






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






4. 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






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






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






7. The more of a good that is produced - the greater the opportunity cost of producing the next unit of that good






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






9. 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.






10. A good for which higher income decreases demand






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






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






13. 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.






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






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






16. AVC = TVC/Q






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






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






19. 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






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






21. 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






22. 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






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






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






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






26. 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






27. 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






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






29. ATC = TC/Q = AFC + AVC






30. 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






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






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






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






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






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






36. The sum of consumer surplus and producer surplus






37. The marginal utility from consumption of more and more of that item falls over time






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






39. Total product divided by labor employed. APL = TPL/L






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






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






42. 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






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






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






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






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






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






48. Goods that are both nonrival and nonexcludable. One person's consumption does not prevent another from also consuming that good and if it is provided to some - it is necessarily provided to all - even if they do not pay for that good






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






50. 0 < Ei < 1