Test your basic knowledge |

AP Microeconomics

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






2. The marginal utility from consumption of more and more of that item falls over time






3. 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






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






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






6. A good for which higher income decreases demand






7. The mechanism for combining production resources - with existing technology - into finished goods and services






8. 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






9. 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






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






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






12. 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






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






14. 0 < Ei < 1






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






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






17. 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.






18. 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






19. 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






20. 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






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






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






23. AVC = TVC/Q






24. 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






25. Ei > 1






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






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






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






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






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. Ed = 1






32. Ed = 8 - infinite change in demand to price change






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






34. Ed < 1






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






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






37. 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






38. Exists at the point where the quantity supplied equals the quantity demanded






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






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






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






42. Ed > 1 - meaning consumers are price sensitive






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






44. Ed = 0 - no response to price change






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






46. 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.






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






48. 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






49. The difference between total revenue and total explicit and implicit costs






50. 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