Test your basic knowledge |

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. 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






2. 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






3. Ed < 1






4. The difference between total revenue and total explicit and implicit costs






5. 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






6. 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






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






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






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






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






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






12. AVC = TVC/Q






13. 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






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






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






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






17. A measure of industry market power. Sum the market share of the four largest firms and a ratio above 40% is a good indicator of oligopoly






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






19. 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






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






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






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






23. 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






24. A market structure characterized by a few small firms producing a differentiated product with easy entry into the market






25. 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.






26. 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






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






28. AFC = TFC/Q






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






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






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






32. The difference between total revenue and total explicit costs






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






34. 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






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






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






37. 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






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






39. Models where firms agree to mutually improve their situation






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






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






44. 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.






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






46. 0 < Ei < 1






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






48. 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






49. The number of units of any other good Y that must be sacrificed to acquire good X. Only relative prices matter






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