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






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






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






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






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






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






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






8. 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






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






10. Ed = 1






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






12. 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






13. The difference between total revenue and total explicit costs






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






15. Entry (or exit) of firms does not shift the cost curves of firms in the industry






16. The sum of consumer surplus and producer surplus






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






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






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






20. Ed = 0 - no response to price change






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






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






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






24. 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






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






26. The combination of labor and capital that minimizes total costs for a given production rate. Hire L and K so that MPL / PL = MPK / PK or MPL/MPK = PL/PK






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






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






29. 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.






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






31. 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






32. Ei > 1






33. 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






34. 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






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






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






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. Production of maximum output for a given level of technology and resources. All points on the PPF are productively efficient






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






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






41. 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






42. 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






43. 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.






44. Labor demand for the firm is MRPL curve. The labor demanded for the entire market DL = ?MRPL of all firms






45. 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






46. 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






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






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






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







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