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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. 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






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






3. 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






4. 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






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






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






7. Ed = 0 - no response to price change






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






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






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






12. TR = P * Qd






13. Entry (or exit) of firms does not shift the cost curves of firms in the industry






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






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






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






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






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






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






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






22. 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






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






24. 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






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






26. 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






27. 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






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






29. Ed = 1






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






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






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






33. 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






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






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






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






37. 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






38. Production inputs that the firm can adjust in the short run to meet changes in demand for their output. Often this is labor and/or raw materials






39. 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






40. 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






41. ATC = TC/Q = AFC + AVC






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






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






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






45. Exists if a producer can produce a good at lower opportunity cost than all other producers






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






47. 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






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






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






50. 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







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