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Test your basic knowledge |
AP Microeconomics
Start Test
Study First
Subjects
:
economics
,
ap
Instructions:
Answer 50 questions in 15 minutes.
If you are not ready to take this test, you can
study here
.
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. 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
Substitute Goods
Determinants of Supply
Economic Profit
Price discrimination
2. 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
Short run
Excise Tax
Increasing Cost Industry
Excess Capacity
3. 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
Absolute Advantage
Total Revenue
Marginal Resource Cost (MRC)
Price inelastic demand
4. The additional cost incurred from the consumption of the next unit of a good or a service
Necessity
Marginal Cost (MC)
Average Product of Labor (APL)
Increasing Cost Industry
5. 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.
Substitution Effect
Diseconomies of Scale
Total Revenue Test
Law of Diminishing Marginal Utility
6. 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
Income Elasticity
Marginal tax rate
Perfectly elastic
Perfectly competitive long-run equilibrium
7. The mechanism for combining production resources - with existing technology - into finished goods and services
Long Run
Law of Diminishing Marginal Utility
Production function
Determinants of Demand
8. Characterized by many small price-taking firms producing a standardized product in an industry in which there are no barriers to entry or exit
Productive Efficiency
Allocative Efficiency
Resources
Perfect competition
9. The least competitive market structure - characterized by a single producer - with no close substitutes - barriers to entry - and price making power
Monopoly
Profit Maximizing Resource Employment
Fixed inputs
Derived Demand
10. 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
Price floor
Allocative Efficiency
Total Welfare
Monopoly
11. 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
Determinants of Demand
Monopoly long-run equilibrium
Perfect competition
Opportunity Cost
12. The practice of selling essentially the same good to different groups of consumers at different prices
Oligopoly
Economics
Price discrimination
Economic Profit
13. Exists at the point where the quantity supplied equals the quantity demanded
Market Equilibrium
Necessity
Specialization
Total Fixed Costs (TFC)
14. Exists if a producer can produce a good at lower opportunity cost than all other producers
Comparative Advantage
Law of Increasing Costs
Shutdown Point
Break-even Point
15. 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
Price discrimination
Cross-Price Elasticity of Demand
Economies of Scale
Opportunity Cost
16. Ed = 0 - no response to price change
Absolute prices
Long Run
Public goods
Perfectly inelastic
17. Ed = 1
Unit elastic demand
Consumer surplus
Monopolistic competition long-run equilibrium
Marginal tax rate
18. 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
Incidence of Tax
Four-firm concentration ratio
Economic Profit
Marginal Cost (MC)
19. Labor demand for the firm is MRPL curve. The labor demanded for the entire market DL = ?MRPL of all firms
Total Product of Labor (TPL)
Marginal Product of Labor (MPL)
Demand for Labor
Market Economy (Capitalism)
20. The philosophy that a citizen should receive a share of economic resources proportional to the marginal revenue product of his or her productivity
Price elasticity
Marginal Productivity Theory
Necessity
Scarcity
21. A period of time long enough to alter the plant size. New firms can enter the industry and existing firms can liquidate and exit
Long Run
Oligopoly
Public goods
Price Elasticity of Supply
22. A market structure characterized by a few small firms producing a differentiated product with easy entry into the market
Law of Increasing Costs
Spillover benefits
Monopolistic competition
Monopsonist
23. Ed < 1
Inferior Goods
Utility Maximizing Rule
Price inelastic demand
Luxury
24. The most desirable alternative given up as the result of a decision
Positive externality
Marginal Product of Labor (MPL)
Public goods
Opportunity Cost
25. Ei > 1
Positive externality
Negative externality
Luxury
Total Fixed Costs (TFC)
26. All firms maximize profit by producing where MR = MC
Profit Maximizing Rule
Price elasticity
Absolute Advantage
Law of Demand
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
Constrained Utility Maximization
Marginal Resource Cost (MRC)
Shutdown Point
Substitution Effect
28. Occurs when there is no more incentive for firms to enter or exit. P=MR=MC=ATC and profit = 0
Perfectly competitive long-run equilibrium
Normal Goods
Specialization
Marginal Benefit (MB)
29. Demand for a resource like labor is derived from the demand for the goods produced by the resource
Inferior Goods
Derived Demand
Income Elasticity
Public goods
30. The firm hires the profit maximizing amount of a resource at the point where MRP = MRC
Profit Maximizing Resource Employment
Relative Prices
Opportunity Cost
Total Fixed Costs (TFC)
31. Ed = 8 - infinite change in demand to price change
Perfectly elastic
Average Variable Cost (AVC)
Marginal Productivity Theory
Fixed inputs
32. Total revenue rises with a price increase if demand is price inelastic and falls with a price increase if demand is price elastic
Average Fixed Cost (AFC)
Absolute prices
Total Revenue Test
Average Total Cost (ATC)
33. The sum of consumer surplus and producer surplus
Market Economy (Capitalism)
Marginal Resource Cost (MRC)
Total Welfare
Production function
34. 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
Income Elasticity
Producer surplus
Inferior Goods
Total Revenue Test
35. 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
Price Ceiling
Increasing Cost Industry
Marginal Benefit (MB)
Marginal Resource Cost (MRC)
36. Costs that do not vary with changes in short-run output. They must be paid even when output is zero.
Derived Demand
Total Fixed Costs (TFC)
Average Variable Cost (AVC)
Law of Demand
37. Production inputs that the firm can adjust in the short run to meet changes in demand for their output. Often this is labor and/or raw materials
Break-even Point
Absolute Advantage
Variable inputs
Private goods
38. Costs that change with the level of output. If output is zero - so are TVCs.
Monopolistic competition
Profit Maximizing Resource Employment
Total variable costs (TVC)
Opportunity Cost
39. Exists when the production of a good imposes disutility upon third parties not directly involved in the consumption or production of the good
Monopsonist
Determinants of Labor Demand
Economic Profit
Negative externality
40. 0 < Ei < 1
Variable inputs
Necessity
Accounting Profit
Explicit costs
41. Occurs when LRAC is constant over a variety of plant sizes
Derived Demand
Constant Returns to Scale
Dead Weight Loss
Market power
42. Total product divided by labor employed. APL = TPL/L
Average Product of Labor (APL)
Short run
Excess Capacity
Price elasticity
43. 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
Free-Rider Problem
Normal Profit
Producer surplus
Monopoly
44. The difference between the monopolistic competition output Qmc and the output at minimum ATC. Excess capacity is underused plant and equipment
Diseconomies of Scale
Average Product of Labor (APL)
Excess Capacity
Decreasing Cost industry
45. Entry of new firms shifts the cost curves for all firms upward
Complementary Goods
Total Revenue
Increasing Cost Industry
Non-collusive oligopoly
46. The case where economies of scale are so extensive that it is less costly for one firm to supply the entire range of demand
Natural Monopoly
Profit Maximizing Rule
Perfectly inelastic
Price elasticity
47. MUx / Px = MUy/Py or MUx/MUy = Px/Py
Utility Maximizing Rule
Decreasing Cost industry
Positive externality
Absolute Advantage
48. Production of maximum output for a given level of technology and resources. All points on the PPF are productively efficient
Productive Efficiency
Opportunity Cost
Subsidy
Demand for Labor
49. 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
Production function
Marginal Revenue Product (MRP)
Public goods
Marginal Cost (MC)
50. 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
Constrained Utility Maximization
Public goods
Determinants of Demand
Average Variable Cost (AVC)