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






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






3. 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






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






5. The difference between total revenue and total explicit and implicit costs






6. AVC = TVC/Q






7. 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






8. 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






9. 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






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






11. 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






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






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






14. Ed > 1 - meaning consumers are price sensitive






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






16. Indirect - non-purchased - or opportunity costs of resources provided by the entrepreneur






17. 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






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






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






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






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






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






23. 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






24. 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






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






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






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






28. AFC = TFC/Q






29. 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






30. The sum of consumer surplus and producer surplus






31. 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






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






33. 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






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






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






36. 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






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






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






39. A good for which higher income increases demand






40. 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.






41. The difference between total revenue and total explicit costs






42. A good for which higher income decreases demand






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






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






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






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






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






48. Ed = 0 - no response to price change






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






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