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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. The study of how people - firms - and societies use their scarce productive resources to best satisfy their unlimited material wants.






2. 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






3. The most desirable alternative given up as the result of a decision






4. 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.






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






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






7. 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






8. 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






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






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






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






12. When firms focus their resources on production of goods for which they have comparative advantage






13. Production inputs that the firm can adjust in the short run to meet changes in demand for their output. Often this is labor and/or raw materials






14. 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






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






16. 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






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






18. The difference between total revenue and total explicit costs






19. The sum of consumer surplus and producer surplus






20. Characterized by many small price-taking firms producing a standardized product in an industry in which there are no barriers to entry or exit






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






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






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






24. 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






25. AFC = TFC/Q






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






27. AVC = TVC/Q






28. Additional costs to society not captured by the market supply curve from the production of a good - result in a price that is too low and a market quantity that is too high. Resources are overallocated to the production of this good






29. The imbalance between limited productive resources and unlimited human wants






30. The case where economies of scale are so extensive that it is less costly for one firm to supply the entire range of demand






31. The change in quantity demanded that results from a change in the consumer's purchasing power (or real income)






32. Ei > 1






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






34. TR = P * Qd






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






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






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






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






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






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






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






42. 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






43. Ed > 1 - meaning consumers are price sensitive






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






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






46. 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






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






48. Models where firms agree to mutually improve their situation






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






50. Direct - purchased - out-of-pocket costs paid to resource suppliers provided by the entrepreneur