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






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






3. 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






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






5. Ed > 1 - meaning consumers are price sensitive






6. 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






7. 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






8. 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






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






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






11. Demand for a resource like labor is derived from the demand for the goods produced by the resource






12. Entry of new firms shifts the cost curves for all firms upward






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






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






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






16. Occurs when there is no more incentive for firms to enter or exit. P=MR=MC=ATC and profit = 0






17. Ed < 1






18. The difference between total revenue and total explicit costs






19. 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






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






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






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






23. 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






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






25. 0 < Ei < 1






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






27. 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






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






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






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






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






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






33. The output where ATC is minimized and economic profit is zero






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. AFC = TFC/Q






36. 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






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






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






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






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






41. The study of how people - firms - and societies use their scarce productive resources to best satisfy their unlimited material wants.






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






43. 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






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






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






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






47. The change in quantity demanded resulting from a change in the price of one good relative to other goods






48. The mechanism for combining production resources - with existing technology - into finished goods and services






49. A legal minimum price below which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent surplus






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