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AP Microeconomics

Subjects : economics, ap
  • 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. 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

2. The sum of consumer surplus and producer surplus

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

4. 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

5. Ed < 1

6. 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

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

8. 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.

9. 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

10. 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

11. 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

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

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

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

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

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

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

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

19. 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

20. 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

21. 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

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

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

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

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

26. 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

27. 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

28. 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

29. AVC = TVC/Q

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

31. 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

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

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

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

35. 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

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

37. A good for which higher income increases demand

38. 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

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

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

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

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

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

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

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

46. A good for which higher income decreases demand

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

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

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

50. 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