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






2. 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






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






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






5. TR = P * Qd






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






7. 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






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






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






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






11. 0 < Ei < 1






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






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






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






15. Ed < 1






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






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






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






19. Ed > 1 - meaning consumers are price sensitive






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






21. 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






22. Ed = 1






23. 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






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






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






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






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






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






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






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






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






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






33. 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.






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






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






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






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 most desirable alternative given up as the result of a decision






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






40. 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






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






42. 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






43. Two goods are consumer complements if they provide more utility when consumed together than when consumed separately






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






45. 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






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






47. 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






48. AFC = TFC/Q






49. 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






50. ATC = TC/Q = AFC + AVC







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