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






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






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






4. 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






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






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






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






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






9. 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






10. 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






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






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






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






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






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






16. 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






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






18. Goods that are both nonrival and nonexcludable. One person's consumption does not prevent another from also consuming that good and if it is provided to some - it is necessarily provided to all - even if they do not pay for that good






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






20. The difference between total revenue and total explicit costs






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






22. 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






23. Ed < 1






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






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






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






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






28. 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






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






30. 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






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






32. Ei > 1






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






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






35. 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






36. Ed = 0 - no response to price change






37. AFC = TFC/Q






38. 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






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






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






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






42. 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.






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






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






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






46. 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






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






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






49. Exists when the production of a good imposes disutility upon third parties not directly involved in the consumption or production of the good






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