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Test your basic knowledge |
AP Microeconomics
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Subjects
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economics
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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. 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
Unit elastic demand
Relative Prices
Four-firm concentration ratio
Shortage
2. The change in quantity demanded resulting from a change in the price of one good relative to other goods
Substitution Effect
Marginal Revenue Product (MRP)
Marginal Resource Cost (MRC)
Marginal Productivity Theory
3. The difference between the price received and the marginal cost of producing the good. It is the area above the supply curve and under the price
Marginal Product of Labor (MPL)
Monopsonist
Producer surplus
Absolute prices
4. ATC = TC/Q = AFC + AVC
Spillover costs
Economics
Total Revenue Test
Average Total Cost (ATC)
5. Occurs when LRAC is constant over a variety of plant sizes
Subsidy
Economies of Scale
Decreasing Cost industry
Constant Returns to Scale
6. The more of a good that is produced - the greater the opportunity cost of producing the next unit of that good
Accounting Profit
Law of Increasing Costs
Marginal Product of Labor (MPL)
Marginal Revenue Product (MRP)
7. 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.
Resources
Marginal Revenue Product (MRP)
Necessity
Substitute Goods
8. The number of units of any other good Y that must be sacrificed to acquire good X. Only relative prices matter
Relative Prices
Law of Demand
Accounting Profit
Opportunity Cost
9. Costs that change with the level of output. If output is zero - so are TVCs.
Total variable costs (TVC)
Demand for Labor
Average Total Cost (ATC)
Excise Tax
10. The marginal utility from consumption of more and more of that item falls over time
Shortage
Law of Diminishing Marginal Utility
Opportunity Cost
Perfect competition
11. Total revenue rises with a price increase if demand is price inelastic and falls with a price increase if demand is price elastic
Monopsonist
Subsidy
Total Revenue Test
Monopolistic competition
12. Exists if a producer can produce a good at lower opportunity cost than all other producers
Total Revenue Test
Luxury
Comparative Advantage
Monopoly
13. The mechanism for combining production resources - with existing technology - into finished goods and services
Economies of Scale
Production function
Derived Demand
Perfectly inelastic
14. The price of a good measured in units of currency
Absolute prices
Scarcity
Free-Rider Problem
Resources
15. All firms maximize profit by producing where MR = MC
Profit Maximizing Rule
Short run
Economic Profit
Marginal Resource Cost (MRC)
16. Excess demand; a shortage exists at a market price when the quantity demanded exceeds the quantity supplied
Decreasing Cost industry
Shortage
Law of Supply
Constant Returns to Scale
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
Allocative Efficiency
Excess Capacity
Total Welfare
Monopoly
18. Production inputs that cannot be changed in the short run. Usually this is the plant size or capital
Non-collusive oligopoly
Derived Demand
Fixed inputs
Comparative Advantage
19. Ed = 8 - infinite change in demand to price change
Increasing Cost Industry
Law of Supply
Perfectly elastic
Profit Maximizing Rule
20. A market structure characterized by a few small firms producing a differentiated product with easy entry into the market
Subsidy
Economic Growth
Monopolistic competition
Accounting Profit
21. 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
Marginal Analysis
Marginal Resource Cost (MRC)
Short run
Derived Demand
22. 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
Total Revenue
Consumer surplus
Implicit costs
Inferior Goods
23. 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
Non-collusive oligopoly
Oligopoly
Cross-Price Elasticity of Demand
Absolute Advantage
24. A per unit tax on production results in a vertical shift in the supply curve by the amount of the tax
Excise Tax
Shortage
Collusive oligopoly
Cross-Price Elasticity of Demand
25. Entry (or exit) of firms does not shift the cost curves of firms in the industry
Marginal Product of Labor (MPL)
Positive externality
Constant cost industry
Break-even Point
26. Entry of new firms shifts the cost curves for all firms upward
Average Total Cost (ATC)
Increasing Cost Industry
Long Run
Collusive oligopoly
27. Characterized by many small price-taking firms producing a standardized product in an industry in which there are no barriers to entry or exit
Cross-Price Elasticity of Demand
Perfect competition
Average Product of Labor (APL)
Average Total Cost (ATC)
28. TR = P * Qd
Substitute Goods
Total Revenue
Economies of Scale
Determinants of Demand
29. 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
Long Run
Break-even Point
Spillover benefits
Price Ceiling
30. 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
Shutdown Point
Law of Supply
Monopoly long-run equilibrium
Production function
31. 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
Consumer surplus
Total Product of Labor (TPL)
Least-Cost Rule
Four-firm concentration ratio
32. The change in total product resulting from a change in the labor input. MPL = dTPL/dL - or the slope of total product
Marginal Resource Cost (MRC)
Decreasing Cost industry
Marginal Product of Labor (MPL)
Allocative Efficiency
33. Costs that do not vary with changes in short-run output. They must be paid even when output is zero.
Non-collusive oligopoly
Total Welfare
Perfect competition
Total Fixed Costs (TFC)
34. 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
Free-Rider Problem
Total Welfare
Least-Cost Rule
Subsidy
35. Two goods are consumer substitutes if they provide essentially the same utility to consumers
Substitute Goods
Production function
Luxury
Monopsonist
36. Another way of saying that firms are earning zero economic profits or a fair rate of return on invested resources
Scarcity
Price elasticity
Normal Profit
Excess Capacity
37. The case where economies of scale are so extensive that it is less costly for one firm to supply the entire range of demand
Opportunity Cost
Derived Demand
Production function
Natural Monopoly
38. Consumer income - prices of substitute and complementary goods - consumer tastes and preferences - consumer speculation - and number of buyers in the market all influence demand
Determinants of Demand
Long Run
Spillover benefits
Perfectly inelastic
39. The most desirable alternative given up as the result of a decision
Marginal Analysis
Absolute Advantage
Oligopoly
Opportunity Cost
40. 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
Cross-Price Elasticity of Demand
Average Variable Cost (AVC)
Short run
Derived Demand
41. MUx / Px = MUy/Py or MUx/MUy = Px/Py
Absolute prices
Inferior Goods
Utility Maximizing Rule
Perfectly inelastic
42. Substitutes - cost as percentage of income - and time to adjust to price changes all influence price elasticity
Determinants of elasticity
Excess Capacity
Unit elastic demand
Economies of Scale
43. Ed < 1
Price inelastic demand
Monopolistic competition long-run equilibrium
Substitute Goods
Diseconomies of Scale
44. 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
Marginal Product of Labor (MPL)
Price elasticity
Short run
Specialization
45. 0 < Ei < 1
Economic Growth
Long Run
Necessity
Collusive oligopoly
46. Production of maximum output for a given level of technology and resources. All points on the PPF are productively efficient
Perfect competition
Decreasing Cost industry
Implicit costs
Productive Efficiency
47. Occurs when there is no more incentive for firms to enter or exit. P=MR=MC=ATC and profit = 0
Economic Growth
Perfectly competitive long-run equilibrium
Marginal Revenue Product (MRP)
Constrained Utility Maximization
48. Total product divided by labor employed. APL = TPL/L
Necessity
Incidence of Tax
Average Product of Labor (APL)
Determinants of elasticity
49. Labor demand for the firm is MRPL curve. The labor demanded for the entire market DL = ?MRPL of all firms
Determinants of Demand
Demand for Labor
Marginal Productivity Theory
Law of Diminishing Marginal Utility
50. Models where firms agree to mutually improve their situation
Constrained Utility Maximization
Determinants of elasticity
Specialization
Collusive oligopoly