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






2. 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






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






4. Pmc < MR = MC and Pmc > minimum ATC so outcome is not efficient - but profit = 0.






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






6. A good for which higher income decreases demand






7. 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






8. Labor demand for the firm is MRPL curve. The labor demanded for the entire market DL = ?MRPL of all firms






9. Ed > 1 - meaning consumers are price sensitive






10. Es = (%dQs) / (%dPrice)






11. Occurs when there is no more incentive for firms to enter or exit. P=MR=MC=ATC and profit = 0






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






13. Additional benefits to society not captured by the market demand curve from the production of a good - result in a price that is too high and a market quantity that is too low. Resources are underallocated to the production of this good






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






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






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






17. 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






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






19. Direct - purchased - out-of-pocket costs paid to resource suppliers provided by the entrepreneur






20. The lost net benefit to society caused by a movement away from the competitive market equilibrium






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






22. Total product divided by labor employed. APL = TPL/L






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






24. 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






25. The difference between total revenue and total explicit costs






26. TR = P * Qd






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






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






29. The sum of consumer surplus and producer surplus






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






31. 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






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






33. 0 < Ei < 1






34. Factors of production - 4 categories: labor - physical capital - land/natural resources - and entrepreneurial ability






35. ATC = TC/Q = AFC + AVC






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






37. AFC = TFC/Q






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






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






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






41. The combination of labor and capital that minimizes total costs for a given production rate. Hire L and K so that MPL / PL = MPK / PK or MPL/MPK = PL/PK






42. The change in quantity demanded resulting from a change in the price of one good relative to other goods






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






44. Ed < 1






45. 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






46. A good for which higher income increases demand






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






48. Ed = 0 - no response to price change






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






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







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