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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 difference between total revenue and total explicit and implicit costs






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






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






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






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






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






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






8. The additional cost incurred from the consumption of the next unit of a good or a service






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






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






11. Ed < 1






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






13. 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






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






15. 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






16. 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






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






18. Ed = 1






19. 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






20. 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.






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






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






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






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






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. 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






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






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






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






30. 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






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






32. Ei > 1






33. 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






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






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






36. 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






37. ATC = TC/Q = AFC + AVC






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






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






40. TR = P * Qd






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






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






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






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






45. 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






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






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






48. 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






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






50. Measures the value of what the next unit of a resource (e.g. - labor) brings to the firm. MRPL = MR x MPL. In a perfectly competitive product market - MRPL = P x MPL. In a monopoly product market - MR < P so MRPm < MRPc.