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. A good for which higher income increases demand






2. 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






3. Ed > 1 - meaning consumers are price sensitive






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






5. A firm that has market power in the factor market (a wage-setter)






6. Additional costs to society not captured by the market supply curve from the production of a good - result in a price that is too low and a market quantity that is too high. Resources are overallocated to the production of this good






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






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






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






10. 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






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






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






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






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






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






16. 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






17. AFC = TFC/Q






18. The total quantity - or total output of a good produced at each quantity of labor employed






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. 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






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






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






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






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






25. 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






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






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






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






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






30. 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






31. 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






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






33. A good for which higher income decreases demand






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






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






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






37. 0 < Ei < 1






38. Ed < 1






39. 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






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






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






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






43. Models where firms agree to mutually improve their situation






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






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






46. 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






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






48. ATC = TC/Q = AFC + AVC






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






50. 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