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AP Microeconomics
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economics
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ap
Instructions:
Answer 50 questions in 15 minutes.
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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. Has opposite effect of an excise tax - as it lowers the marginal cost of production - forcing the supply curve down
Incidence of Tax
Subsidy
Collusive oligopoly
Income Effect
2. A period of time long enough to alter the plant size. New firms can enter the industry and existing firms can liquidate and exit
Absolute Advantage
Long Run
Public goods
Derived Demand
3. MUx / Px = MUy/Py or MUx/MUy = Px/Py
Comparative Advantage
Utility Maximizing Rule
Explicit costs
Determinants of elasticity
4. Exists if a producer can produce more of a good than all other producers
Variable inputs
Absolute Advantage
Complementary Goods
Market power
5. Occurs when LRAC is constant over a variety of plant sizes
Economics
Total Welfare
Constant Returns to Scale
Surplus
6. Occurs when there is no more incentive for firms to enter or exit. P=MR=MC=ATC and profit = 0
Non-collusive oligopoly
Diseconomies of Scale
Perfectly competitive long-run equilibrium
Negative externality
7. Holding all else equal - when the price of a good rises - consumers decrease their quantity demanded for that good
Utility Maximizing Rule
Negative externality
Surplus
Law of Demand
8. 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
Least-Cost Rule
Price Ceiling
Constrained Utility Maximization
Diseconomies of Scale
9. The change in quantity demanded resulting from a change in the price of one good relative to other goods
Long Run
Price floor
Substitution Effect
Shortage
10. Ed = 1
Law of Diminishing Marginal Utility
Productive Efficiency
Unit elastic demand
Law of Supply
11. Entry of new firms shifts the cost curves for all firms upward
Constant Returns to Scale
Decreasing Cost industry
Average Total Cost (ATC)
Increasing Cost Industry
12. 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
Productive Efficiency
Short run
Perfectly inelastic
Variable inputs
13. The difference between total revenue and total explicit costs
Total Welfare
Productive Efficiency
Spillover costs
Accounting Profit
14. When firms focus their resources on production of goods for which they have comparative advantage
Price elasticity
Least-Cost Rule
Allocative Efficiency
Specialization
15. Entry (or exit) of firms does not shift the cost curves of firms in the industry
Normal Profit
Constant cost industry
Law of Diminishing Marginal Utility
Market power
16. The sum of consumer surplus and producer surplus
Total Welfare
Perfectly elastic
Monopolistic competition
Accounting Profit
17. The most desirable alternative given up as the result of a decision
Specialization
Total Product of Labor (TPL)
Opportunity Cost
Market power
18. Entry of new firms shifts the cost curves for all firms downward
Determinants of Demand
Perfectly competitive long-run equilibrium
Productive Efficiency
Decreasing Cost industry
19. Production inputs that cannot be changed in the short run. Usually this is the plant size or capital
Fixed inputs
Marginal Resource Cost (MRC)
Excise Tax
Normal Goods
20. Ed = 0 - no response to price change
Dead Weight Loss
Short run
Economics
Perfectly inelastic
21. The additional cost incurred from the consumption of the next unit of a good or a service
Income Elasticity
Normal Goods
Fixed inputs
Marginal Cost (MC)
22. The difference between the monopolistic competition output Qmc and the output at minimum ATC. Excess capacity is underused plant and equipment
Monopolistic competition
Excess Capacity
Positive externality
Producer surplus
23. Pmc < MR = MC and Pmc > minimum ATC so outcome is not efficient - but profit = 0.
Negative externality
Monopolistic competition long-run equilibrium
Oligopoly
Absolute Advantage
24. 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
Market Economy (Capitalism)
Natural Monopoly
Subsidy
Spillover benefits
25. The more of a good that is produced - the greater the opportunity cost of producing the next unit of that good
Short run
Production function
Law of Increasing Costs
Spillover costs
26. 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
Perfectly competitive long-run equilibrium
Decreasing Cost industry
Implicit costs
27. Costs that change with the level of output. If output is zero - so are TVCs.
Total variable costs (TVC)
Economies of Scale
Absolute prices
Determinants of Demand
28. Excess demand; a shortage exists at a market price when the quantity demanded exceeds the quantity supplied
Shortage
Determinants of elasticity
Producer surplus
Law of Supply
29. 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.
Price Elasticity of Supply
Economic Growth
Total Fixed Costs (TFC)
Economies of Scale
30. Ed = (%dQd)/(%dP). Ignore negative sign
Constant cost industry
Marginal Analysis
Price elasticity
Total Revenue
31. 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
Four-firm concentration ratio
Subsidy
Total Welfare
Complementary Goods
32. Ei > 1
Marginal Benefit (MB)
Cartel
Average Variable Cost (AVC)
Luxury
33. 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
Explicit costs
Resources
Cartel
Constrained Utility Maximization
34. 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
Market power
Non-collusive oligopoly
Allocative Efficiency
Determinants of Supply
35. Demand for a resource like labor is derived from the demand for the goods produced by the resource
Cross-Price Elasticity of Demand
Derived Demand
Non-collusive oligopoly
Necessity
36. The total quantity - or total output of a good produced at each quantity of labor employed
Excise Tax
Marginal tax rate
Total Product of Labor (TPL)
Average Product of Labor (APL)
37. 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
Marginal tax rate
Total Fixed Costs (TFC)
Allocative Efficiency
Relative Prices
38. Production of maximum output for a given level of technology and resources. All points on the PPF are productively efficient
Comparative Advantage
Least-Cost Rule
Marginal Cost (MC)
Productive Efficiency
39. The rational decision maker chooses an action if MB = MC
Economic Growth
Economics
Marginal Benefit (MB)
Marginal Analysis
40. Models where firms are competitive rivals seeking to gain at the expense of their rivals
Marginal tax rate
Non-collusive oligopoly
Opportunity Cost
Marginal Cost (MC)
41. Goods that are both rival and excludable. Only one person can consume the good at a time and consumers who do not pay for the good are excluded from consumption
Production function
Market Economy (Capitalism)
Private goods
Dead Weight Loss
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
Total Product of Labor (TPL)
Dead Weight Loss
Oligopoly
Price discrimination
43. 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.
Resources
Positive externality
Diseconomies of Scale
Non-collusive oligopoly
44. Labor demand for the firm is MRPL curve. The labor demanded for the entire market DL = ?MRPL of all firms
Consumer surplus
Demand for Labor
Market Economy (Capitalism)
Comparative Advantage
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
Average Product of Labor (APL)
Market Equilibrium
Consumer surplus
Market power
46. 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
Total Revenue
Public goods
Private goods
Absolute Advantage
47. A per unit tax on production results in a vertical shift in the supply curve by the amount of the tax
Perfect competition
Law of Supply
Excise Tax
Monopolistic competition long-run equilibrium
48. The price of a good measured in units of currency
Absolute prices
Resources
Price elastic demand
Perfect competition
49. Exists when the production of a good imposes disutility upon third parties not directly involved in the consumption or production of the good
Negative externality
Normal Goods
Consumer surplus
Marginal Resource Cost (MRC)
50. Product demand - productivity - prices of other resources - and complementary resources
Scarcity
Relative Prices
Determinants of Labor Demand
Market Equilibrium
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