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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.
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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. ATC = TC/Q = AFC + AVC






3. A per unit tax on production results in a vertical shift in the supply curve by the amount of the tax






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






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






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






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






8. A good for which higher income increases demand






9. TR = P * Qd






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






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






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






13. Occurs when LRAC is constant over a variety of plant sizes






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






15. 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






16. 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






17. 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






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






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






20. 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






21. A group of firms that agree not to compete with each other on the basis of price - production - or other competitive dimensions. Cartel members operate as a monopolist to maximize their joint profits






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






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






24. 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






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






26. 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






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






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






29. 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






30. 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






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






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






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






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






35. A good for which higher income decreases demand






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






37. 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






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






39. Demand for a resource like labor is derived from the demand for the goods produced by the resource






40. 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






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






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






43. Es = (%dQs) / (%dPrice)






44. Ed > 1 - meaning consumers are price sensitive






45. Ed < 1






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






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






48. The practice of selling essentially the same good to different groups of consumers at different prices






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






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