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






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






3. Ed > 1 - meaning consumers are price sensitive






4. 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






5. 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






6. Exists when the production of a good creates utility for third parties not directly involved in the consumption of production of the good






7. 0 < Ei < 1






8. Ed = 1






9. 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






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






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






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






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






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






15. MUx / Px = MUy/Py or MUx/MUy = Px/Py






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






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






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






19. 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






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






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






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






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






24. Ed < 1






25. Models where firms agree to mutually improve their situation






26. 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






27. 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






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






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






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






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






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






33. ATC = TC/Q = AFC + AVC






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






35. The ability to set the price above the perfectly competitive level






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






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






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






39. A good for which higher income decreases demand






40. 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






41. 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






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






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






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






45. 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






46. 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






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






48. 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






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






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