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






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






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






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






5. 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






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






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






8. 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






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






10. 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






11. 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






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






13. Measures the value of what the next unit of a resource (e.g. - labor) brings to the firm. MRPL = MR x MPL. In a perfectly competitive product market - MRPL = P x MPL. In a monopoly product market - MR < P so MRPm < MRPc.






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






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






16. Characterized by many small price-taking firms producing a standardized product in an industry in which there are no barriers to entry or exit






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






18. 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






19. Ed = 1






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






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






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






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






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






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






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






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






28. 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






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






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






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






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






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






34. Ed < 1






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






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






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






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






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






41. The upward part of the LRAC curve where LRAC rises as plant size increases. This is usually the result of the increased difficulty of managing larger firms - which results in lost efficiency and rising per unit costs.






42. 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






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






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






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






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






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






48. 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






49. A good for which higher income decreases demand






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