Test your basic knowledge |

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






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






3. Ed < 1






4. 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






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






6. Product demand - productivity - prices of other resources - and complementary resources






7. 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






8. 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






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






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






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






12. 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






13. 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






14. 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






15. Ed > 1 - meaning consumers are price sensitive






16. 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.






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






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






19. 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






20. TR = P * Qd






21. 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






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






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






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






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 price of a good measured in units of currency






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






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






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






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






31. 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






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






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






34. The ability to set the price above the perfectly competitive level






35. 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






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






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






38. Ei > 1






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






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






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






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






43. 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






44. The case where economies of scale are so extensive that it is less costly for one firm to supply the entire range of demand






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






46. Consumer income - prices of substitute and complementary goods - consumer tastes and preferences - consumer speculation - and number of buyers in the market all influence demand






47. 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






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






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






50. 0 < Ei < 1