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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. 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






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






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






4. Ed > 1 - meaning consumers are price sensitive






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






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






7. 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.






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






9. MUx / Px = MUy/Py or MUx/MUy = Px/Py






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






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






12. 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






13. The more of a good that is produced - the greater the opportunity cost of producing the next unit of that good






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






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






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






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






18. The least competitive market structure - characterized by a single producer - with no close substitutes - barriers to entry - and price making power






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






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






21. 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






22. 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






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






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






25. Two goods are consumer substitutes if they provide essentially the same utility to consumers






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






27. 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






28. 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






29. 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






30. 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






31. AFC = TFC/Q






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






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






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






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






36. 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






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






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






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






40. 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






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






42. Ed = 0 - no response to price change






43. The difference between your willingness to pay and the price you actually pay. It is the area below the demand curve and above the price






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






45. AVC = TVC/Q






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






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






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






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






50. 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