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






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






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






4. 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






5. Production inputs that cannot be changed in the short run. Usually this is the plant size or capital






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






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






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






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






10. The practice of selling essentially the same good to different groups of consumers at different prices






11. 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






12. Costs that change with the level of output. If output is zero - so are TVCs.






13. Ei > 1






14. 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.






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






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






17. 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






18. 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






19. 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






20. ATC = TC/Q = AFC + AVC






21. 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






22. Models where firms are competitive rivals seeking to gain at the expense of their rivals






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






24. 0 < Ei < 1






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






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






28. 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.






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






30. 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






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






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






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






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






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






36. AVC = TVC/Q






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






39. 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






40. Occurs when an economy's production possibilities increase. This can be a result of more resources - better resources - or improvements in technology.






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






42. The rational decision maker chooses an action if MB = MC






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






44. 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






45. A period of time long enough to alter the plant size. New firms can enter the industry and existing firms can liquidate and exit






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






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






48. Ed = 1






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






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