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Test your basic knowledge |
AP Microeconomics
Start Test
Study First
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
Economic Profit
Marginal Resource Cost (MRC)
Dead Weight Loss
Non-collusive oligopoly
2. 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.
Consumer surplus
Average Variable Cost (AVC)
Spillover benefits
Marginal Revenue Product (MRP)
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
Oligopoly
Producer surplus
Law of Diminishing Marginal Utility
Total Fixed Costs (TFC)
4. The price of a good measured in units of currency
Absolute prices
Total Revenue Test
Marginal Cost (MC)
Price elastic demand
5. The difference between total revenue and total explicit costs
Accounting Profit
Scarcity
Spillover benefits
Constant cost industry
6. The ability to set the price above the perfectly competitive level
Relative Prices
Long Run
Monopolistic competition
Market power
7. The change in total product resulting from a change in the labor input. MPL = dTPL/dL - or the slope of total product
Average Variable Cost (AVC)
Cartel
Marginal Product of Labor (MPL)
Constrained Utility Maximization
8. Entry of new firms shifts the cost curves for all firms upward
Substitution Effect
Unit elastic demand
Increasing Cost Industry
Comparative Advantage
9. 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
Market power
Profit Maximizing Rule
Cross-Price Elasticity of Demand
Average Variable Cost (AVC)
10. The mechanism for combining production resources - with existing technology - into finished goods and services
Producer surplus
Consumer surplus
Least-Cost Rule
Production function
11. Exists when the production of a good imposes disutility upon third parties not directly involved in the consumption or production of the good
Market power
Inferior Goods
Negative externality
Surplus
12. 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.
Diseconomies of Scale
Negative externality
Substitution Effect
Law of Diminishing Marginal Utility
13. Production of maximum output for a given level of technology and resources. All points on the PPF are productively efficient
Productive Efficiency
Least-Cost Rule
Implicit costs
Income Elasticity
14. Ed < 1
Price inelastic demand
Economies of Scale
Average Product of Labor (APL)
Cartel
15. The number of units of any other good Y that must be sacrificed to acquire good X. Only relative prices matter
Relative Prices
Perfectly competitive long-run equilibrium
Determinants of Labor Demand
Determinants of Demand
16. 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
Cartel
Free-Rider Problem
Perfectly inelastic
Monopsonist
17. A firm that has market power in the factor market (a wage-setter)
Economies of Scale
Monopsonist
Positive externality
Determinants of Supply
18. Ei = (%dQd good X)/(%d Income)
Price floor
Shortage
Income Elasticity
Necessity
19. 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
Profit Maximizing Resource Employment
Price inelastic demand
Law of Demand
Spillover benefits
20. 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
Total Welfare
Absolute Advantage
Public goods
Constant Returns to Scale
21. All firms maximize profit by producing where MR = MC
Perfectly inelastic
Total variable costs (TVC)
Average Variable Cost (AVC)
Profit Maximizing Rule
22. 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.
Average Product of Labor (APL)
Accounting Profit
Economies of Scale
Market power
23. The more of a good that is produced - the greater the opportunity cost of producing the next unit of that good
Law of Increasing Costs
Specialization
Spillover benefits
Total Welfare
24. When firms focus their resources on production of goods for which they have comparative advantage
Luxury
Determinants of Demand
Specialization
Allocative Efficiency
25. Product demand - productivity - prices of other resources - and complementary resources
Productive Efficiency
Inferior Goods
Determinants of Labor Demand
Unit elastic demand
26. Entry (or exit) of firms does not shift the cost curves of firms in the industry
Price Elasticity of Supply
Incidence of Tax
Constant cost industry
Accounting Profit
27. Excess demand; a shortage exists at a market price when the quantity demanded exceeds the quantity supplied
Resources
Shortage
Public goods
Constant Returns to Scale
28. Exists at the point where the quantity supplied equals the quantity demanded
Constant cost industry
Market Equilibrium
Total Revenue Test
Normal Goods
29. Models where firms agree to mutually improve their situation
Shortage
Collusive oligopoly
Profit Maximizing Rule
Increasing Cost Industry
30. Ed = 8 - infinite change in demand to price change
Monopolistic competition long-run equilibrium
Variable inputs
Perfectly elastic
Incidence of Tax
31. Ed = (%dQd)/(%dP). Ignore negative sign
Production function
Negative externality
Price elasticity
Monopoly
32. Exists if a producer can produce a good at lower opportunity cost than all other producers
Comparative Advantage
Total Revenue
Economic Growth
Marginal tax rate
33. 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
Positive externality
Law of Supply
Total Revenue
Oligopoly
34. 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
Market power
Price Ceiling
Constant cost industry
Fixed inputs
35. Es = (%dQs) / (%dPrice)
Price Elasticity of Supply
Price discrimination
Implicit costs
Determinants of elasticity
36. Direct - purchased - out-of-pocket costs paid to resource suppliers provided by the entrepreneur
Marginal Revenue Product (MRP)
Excess Capacity
Absolute prices
Explicit costs
37. Factors of production - 4 categories: labor - physical capital - land/natural resources - and entrepreneurial ability
Resources
Average Fixed Cost (AFC)
Utility Maximizing Rule
Production function
38. AFC = TFC/Q
Average Fixed Cost (AFC)
Allocative Efficiency
Negative externality
Long Run
39. Holding all else equal - when the price of a good rises - consumers decrease their quantity demanded for that good
Law of Demand
Negative externality
Implicit costs
Income Elasticity
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
Productive Efficiency
Price floor
Substitution Effect
Long Run
41. 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
Substitution Effect
Inferior Goods
Marginal tax rate
Perfectly inelastic
42. 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
Excise Tax
Cartel
Excess Capacity
Average Variable Cost (AVC)
43. 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
Monopolistic competition
Productive Efficiency
Substitute Goods
Determinants of Supply
44. Substitutes - cost as percentage of income - and time to adjust to price changes all influence price elasticity
Income Elasticity
Collusive oligopoly
Determinants of elasticity
Perfectly inelastic
45. A per unit tax on production results in a vertical shift in the supply curve by the amount of the tax
Substitute Goods
Marginal Product of Labor (MPL)
Shortage
Excise Tax
46. Another way of saying that firms are earning zero economic profits or a fair rate of return on invested resources
Law of Increasing Costs
Substitute Goods
Normal Profit
Explicit costs
47. Ed > 1 - meaning consumers are price sensitive
Decreasing Cost industry
Price elastic demand
Normal Profit
Price Ceiling
48. Ed = 1
Unit elastic demand
Comparative Advantage
Natural Monopoly
Total Revenue
49. Total product divided by labor employed. APL = TPL/L
Average Product of Labor (APL)
Marginal Resource Cost (MRC)
Utility Maximizing Rule
Free-Rider Problem
50. A good for which higher income decreases demand
Inferior Goods
Average Total Cost (ATC)
Excess Capacity
Marginal Benefit (MB)