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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. 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






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






3. 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






4. MUx / Px = MUy/Py or MUx/MUy = Px/Py






5. 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






6. Exists when the production of a good creates utility for third parties not directly involved in the consumption of production of the good






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






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






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






11. AFC = TFC/Q






12. Ei > 1






13. Models where firms agree to mutually improve their situation






14. The difference between total revenue and total explicit costs






15. 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






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






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






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






19. Ed = 1






20. Production inputs that cannot be changed in the short run. Usually this is the plant size or capital






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






22. 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






23. 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






24. 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






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






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






27. 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






28. 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






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






30. 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






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






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






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






34. 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






35. Exists when the production of a good imposes disutility upon third parties not directly involved in the consumption or production of the good






36. The sum of consumer surplus and producer surplus






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






38. Es = (%dQs) / (%dPrice)






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






40. A good for which higher income increases demand






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






42. 0 < Ei < 1






43. 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






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






45. The change in total product resulting from a change in the labor input. MPL = dTPL/dL - or the slope of total product






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






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






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






49. 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.






50. 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