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AP Microeconomics
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economics
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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. Measures the value of what the next unit of a resource (e.g. - labor) brings to the firm. MRPL = MR x MPL. In a perfectly competitive product market - MRPL = P x MPL. In a monopoly product market - MR < P so MRPm < MRPc.
Marginal Revenue Product (MRP)
Price inelastic demand
Perfectly competitive long-run equilibrium
Normal Goods
2. The difference between total revenue and total explicit costs
Accounting Profit
Price Ceiling
Absolute prices
Determinants of elasticity
3. Production inputs that cannot be changed in the short run. Usually this is the plant size or capital
Resources
Fixed inputs
Dead Weight Loss
Constant Returns to Scale
4. Product demand - productivity - prices of other resources - and complementary resources
Constant Returns to Scale
Total variable costs (TVC)
Determinants of Labor Demand
Consumer surplus
5. 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
Specialization
Determinants of Supply
Cartel
Perfect competition
6. The difference between the monopolistic competition output Qmc and the output at minimum ATC. Excess capacity is underused plant and equipment
Excess Capacity
Price inelastic demand
Absolute Advantage
Resources
7. Indirect - non-purchased - or opportunity costs of resources provided by the entrepreneur
Subsidy
Implicit costs
Incidence of Tax
Cross-Price Elasticity of Demand
8. TR = P * Qd
Marginal tax rate
Total variable costs (TVC)
Production function
Total Revenue
9. Consumer income - prices of substitute and complementary goods - consumer tastes and preferences - consumer speculation - and number of buyers in the market all influence demand
Producer surplus
Determinants of Demand
Total Fixed Costs (TFC)
Economies of Scale
10. The change in quantity demanded resulting from a change in the price of one good relative to other goods
Marginal Productivity Theory
Substitution Effect
Opportunity Cost
Price Elasticity of Supply
11. 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
Subsidy
Public goods
Long Run
Total Fixed Costs (TFC)
12. The ability to set the price above the perfectly competitive level
Monopoly long-run equilibrium
Average Product of Labor (APL)
Market power
Perfectly competitive long-run equilibrium
13. Entry (or exit) of firms does not shift the cost curves of firms in the industry
Monopoly long-run equilibrium
Constant cost industry
Constrained Utility Maximization
Negative externality
14. Entry of new firms shifts the cost curves for all firms upward
Total Fixed Costs (TFC)
Explicit costs
Increasing Cost Industry
Price elastic demand
15. Occurs when an economy's production possibilities increase. This can be a result of more resources - better resources - or improvements in technology.
Price discrimination
Economic Growth
Specialization
Increasing Cost Industry
16. 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
Profit Maximizing Rule
Marginal Cost (MC)
Spillover costs
Productive Efficiency
17. A per unit tax on production results in a vertical shift in the supply curve by the amount of the tax
Excise Tax
Subsidy
Scarcity
Marginal Cost (MC)
18. The most desirable alternative given up as the result of a decision
Cross-Price Elasticity of Demand
Income Elasticity
Opportunity Cost
Relative Prices
19. 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.
Economic Growth
Economies of Scale
Monopsonist
Specialization
20. Models where firms are competitive rivals seeking to gain at the expense of their rivals
Law of Supply
Allocative Efficiency
Production function
Non-collusive oligopoly
21. 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
Necessity
Marginal tax rate
Total Product of Labor (TPL)
Determinants of Supply
22. Ed = 1
Absolute Advantage
Total Welfare
Unit elastic demand
Law of Supply
23. Production of maximum output for a given level of technology and resources. All points on the PPF are productively efficient
Absolute Advantage
Public goods
Productive Efficiency
Decreasing Cost industry
24. Has opposite effect of an excise tax - as it lowers the marginal cost of production - forcing the supply curve down
Unit elastic demand
Subsidy
Long Run
Perfectly competitive long-run equilibrium
25. 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
Producer surplus
Economics
Derived Demand
Dead Weight Loss
26. The practice of selling essentially the same good to different groups of consumers at different prices
Price discrimination
Determinants of elasticity
Perfect competition
Spillover costs
27. 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
Variable inputs
Resources
Law of Supply
Long Run
28. Entry of new firms shifts the cost curves for all firms downward
Decreasing Cost industry
Surplus
Absolute prices
Monopoly
29. When firms focus their resources on production of goods for which they have comparative advantage
Average Variable Cost (AVC)
Specialization
Law of Demand
Marginal Productivity Theory
30. Ed = 0 - no response to price change
Monopolistic competition
Perfectly inelastic
Excess Capacity
Monopoly long-run equilibrium
31. The total quantity - or total output of a good produced at each quantity of labor employed
Market Equilibrium
Comparative Advantage
Shutdown Point
Total Product of Labor (TPL)
32. AFC = TFC/Q
Income Elasticity
Average Fixed Cost (AFC)
Economic Profit
Variable inputs
33. Pmc < MR = MC and Pmc > minimum ATC so outcome is not efficient - but profit = 0.
Inferior Goods
Increasing Cost Industry
Monopolistic competition long-run equilibrium
Determinants of Labor Demand
34. 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
Inferior Goods
Oligopoly
Luxury
Average Product of Labor (APL)
35. Es = (%dQs) / (%dPrice)
Price elasticity
Monopoly long-run equilibrium
Price Elasticity of Supply
Public goods
36. Ei = (%dQd good X)/(%d Income)
Derived Demand
Income Elasticity
Monopoly long-run equilibrium
Public goods
37. A period of time long enough to alter the plant size. New firms can enter the industry and existing firms can liquidate and exit
Natural Monopoly
Law of Increasing Costs
Long Run
Economies of Scale
38. 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
Determinants of Demand
Private goods
Law of Supply
Price elastic demand
39. Total product divided by labor employed. APL = TPL/L
Average Product of Labor (APL)
Average Variable Cost (AVC)
Subsidy
Shutdown Point
40. 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
Allocative Efficiency
Increasing Cost Industry
Dead Weight Loss
Accounting Profit
41. The price of a good measured in units of currency
Absolute prices
Spillover costs
Monopoly long-run equilibrium
Price Elasticity of Supply
42. 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
Marginal tax rate
Average Variable Cost (AVC)
Producer surplus
Private goods
43. The imbalance between limited productive resources and unlimited human wants
Constrained Utility Maximization
Economic Growth
Perfectly elastic
Scarcity
44. Exists if a producer can produce a good at lower opportunity cost than all other producers
Resources
Collusive oligopoly
Comparative Advantage
Income Elasticity
45. Holding all else equal - when the price of a good rises - suppliers increase their quantity supplied for that good
Implicit costs
Relative Prices
Average Total Cost (ATC)
Law of Supply
46. The study of how people - firms - and societies use their scarce productive resources to best satisfy their unlimited material wants.
Determinants of Supply
Price Ceiling
Economics
Market Equilibrium
47. Excess supply; exists at a market price when the quantity supplied exceeds the quantity demanded.
Monopoly
Marginal Cost (MC)
Surplus
Shutdown Point
48. Holding all else equal - when the price of a good rises - consumers decrease their quantity demanded for that good
Market Economy (Capitalism)
Marginal tax rate
Law of Demand
Marginal Resource Cost (MRC)
49. 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
Law of Increasing Costs
Price Ceiling
Four-firm concentration ratio
Relative Prices
50. ATC = TC/Q = AFC + AVC
Average Total Cost (ATC)
Explicit costs
Normal Goods
Opportunity Cost
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