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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 price of a good measured in units of currency






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






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






4. 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.






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






6. 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






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






8. 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






9. 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






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






11. 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






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






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






14. Entry (or exit) of firms does not shift the cost curves of firms in the industry






15. TR = P * Qd






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






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






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






19. Ed > 1 - meaning consumers are price sensitive






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






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






22. 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






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






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






25. 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






26. 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






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






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






29. AFC = TFC/Q






30. 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






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






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






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






34. A good for which higher income decreases demand






35. 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






36. AVC = TVC/Q






37. 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






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






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






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






41. Production of maximum output for a given level of technology and resources. All points on the PPF are productively efficient






42. 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






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






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






45. The difference between your willingness to pay and the price you actually pay. It is the area below the demand curve and above the price






46. Ed < 1






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






48. 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






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






50. 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