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AP Microeconomics

Subjects : economics, ap
Instructions:
  • Answer 50 questions in 15 minutes.
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  • 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. MUx / Px = MUy/Py or MUx/MUy = Px/Py






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






3. 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






4. Ei = (%dQd good X)/(%d Income)






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






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






7. Occurs when an economy's production possibilities increase. This can be a result of more resources - better resources - or improvements in technology.






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






9. Ei > 1






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






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






12. 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






13. 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






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






15. Ed < 1






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






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






18. 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






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






20. The sum of consumer surplus and producer surplus






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






22. Holding all else equal - when the price of a good rises - suppliers increase their quantity supplied for that good






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






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






25. Production of maximum output for a given level of technology and resources. All points on the PPF are productively efficient






26. AVC = TVC/Q






27. Substitutes - cost as percentage of income - and time to adjust to price changes all influence price elasticity






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 change in total product resulting from a change in the labor input. MPL = dTPL/dL - or the slope of total product






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






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






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






33. 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






34. A good for which higher income decreases demand






35. 0 < Ei < 1






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






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






38. The additional benefit received from the consumption of the next unit of a good or service






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






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






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






42. 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






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






44. 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






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






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






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






48. A good for which higher income increases demand






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






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