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






2. 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






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






4. 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






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






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






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






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






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






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






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






13. A good for which higher income increases demand






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






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






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






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






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






19. The difference between total revenue and total explicit costs






20. Measures the cost the firm incurs from using an additional unit of input. In a perfectly competitive labor market - MRC = Wage. In a monopsony labor market - the MRC > Wage






21. Ed = 0 - no response to price change






22. 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






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






24. Ei > 1






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






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






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






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






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






30. A good for which higher income decreases demand






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






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






33. 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






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






35. 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






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






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






38. 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






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






40. 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






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






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






43. Excess supply; exists at a market price when the quantity supplied exceeds the quantity demanded.






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






45. The sum of consumer surplus and producer surplus






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






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






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






49. 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






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