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






2. 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






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






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






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






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






7. ATC = TC/Q = AFC + AVC






8. A firm that has market power in the factor market (a wage-setter)






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






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






12. 0 < Ei < 1






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






14. 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






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






16. The number of units of any other good Y that must be sacrificed to acquire good X. Only relative prices matter






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






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






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






20. TR = P * Qd






21. 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






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






23. AFC = TFC/Q






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






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






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






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






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






29. The difference between total revenue and total explicit costs






30. 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.






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. 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






34. 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






35. The practice of selling essentially the same good to different groups of consumers at different prices






36. 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






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






38. Total revenue rises with a price increase if demand is price inelastic and falls with a price increase if demand is price elastic






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






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






41. 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






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






43. 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






44. 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






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






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






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






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






49. 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






50. The least competitive market structure - characterized by a single producer - with no close substitutes - barriers to entry - and price making power