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






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






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






4. The sum of consumer surplus and producer surplus






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






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






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






8. Ed = 1






9. 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.






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






11. 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






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






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






14. A firm that has market power in the factor market (a wage-setter)






15. 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






16. 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






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






18. TR = P * Qd






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






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






21. A good for which higher income decreases demand






22. AFC = TFC/Q






23. A market structure characterized by a few small firms producing a differentiated product with easy entry into the market






24. Ed < 1






25. 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






26. 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






27. 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






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






29. Ei > 1






30. The difference between total revenue and total explicit costs






31. 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






32. 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






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






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






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






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






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






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






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






40. 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






41. Consumer income - prices of substitute and complementary goods - consumer tastes and preferences - consumer speculation - and number of buyers in the market all influence demand






42. Indirect - non-purchased - or opportunity costs of resources provided by the entrepreneur






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






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






45. 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






46. 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






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






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






49. 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






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