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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. A good for which higher income increases demand






3. Pmc < MR = MC and Pmc > minimum ATC so outcome is not efficient - but profit = 0.






4. 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






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






6. 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






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






8. Models where firms agree to mutually improve their situation






9. The proportion of the tax paid by the consumers in the form of a higher price for the taxed good is greater if demand for the good is inelastic and supply is elastic






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






11. 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






12. 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






13. ATC = TC/Q = AFC + AVC






14. 0 < Ei < 1






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






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






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






18. The price of a good measured in units of currency






19. Costs that change with the level of output. If output is zero - so are TVCs.






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






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






22. AVC = TVC/Q






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






24. For one good - constrained by prices and income - a consumer stops consuming a good when the price paid for the next unit is equal to the marginal benefit received






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






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






27. Ed = (%dQd)/(%dP). Ignore negative sign






28. 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






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






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






31. 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






32. 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






33. The sum of consumer surplus and producer surplus






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






35. 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






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






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






38. Ei > 1






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






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






41. The output where ATC is minimized and economic profit is zero






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






43. Ed < 1






44. 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






45. Entry of new firms shifts the cost curves for all firms downward






46. Entry of new firms shifts the cost curves for all firms upward






47. 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






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






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






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