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






2. 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






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






4. Demand for a resource like labor is derived from the demand for the goods produced by the resource






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






6. 0 < Ei < 1






7. 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






8. The additional cost incurred from the consumption of the next unit of a good or a service






9. 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






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






11. 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






12. AFC = TFC/Q






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






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






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






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






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






18. 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






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






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






21. Entry (or exit) of firms does not shift the cost curves of firms in the industry






22. Exists if a producer can produce a good at lower opportunity cost than all other producers






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






24. A good for which higher income decreases demand






25. 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






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






27. Ei > 1






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






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






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






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






32. Excess supply; exists at a market price when the quantity supplied exceeds the quantity demanded.






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






34. 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






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






36. 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






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






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






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






40. 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






41. 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






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






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






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






45. Another way of saying that firms are earning zero economic profits or a fair rate of return on invested resources






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






48. 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.






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






50. 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