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Test your basic knowledge |
AP Microeconomics
Start Test
Study First
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 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
Consumer surplus
Price floor
Free-Rider Problem
Perfect competition
2. The additional benefit received from the consumption of the next unit of a good or service
Marginal Benefit (MB)
Law of Increasing Costs
Marginal Analysis
Total Revenue
3. A good for which higher income decreases demand
Inferior Goods
Marginal Resource Cost (MRC)
Profit Maximizing Rule
Monopolistic competition long-run equilibrium
4. The change in quantity demanded that results from a change in the consumer's purchasing power (or real income)
Resources
Price floor
Luxury
Income Effect
5. Exists if a producer can produce a good at lower opportunity cost than all other producers
Average Variable Cost (AVC)
Allocative Efficiency
Diseconomies of Scale
Comparative Advantage
6. Ei = (%dQd good X)/(%d Income)
Surplus
Income Elasticity
Long Run
Average Variable Cost (AVC)
7. A market structure characterized by a few small firms producing a differentiated product with easy entry into the market
Monopolistic competition
Excise Tax
Demand for Labor
Cartel
8. Exists when the production of a good imposes disutility upon third parties not directly involved in the consumption or production of the good
Market Equilibrium
Monopolistic competition long-run equilibrium
Monopoly long-run equilibrium
Negative externality
9. The philosophy that a citizen should receive a share of economic resources proportional to the marginal revenue product of his or her productivity
Determinants of Supply
Marginal Productivity Theory
Total Revenue
Average Variable Cost (AVC)
10. A firm that has market power in the factor market (a wage-setter)
Monopsonist
Specialization
Explicit costs
Price Elasticity of Supply
11. The difference between total revenue and total explicit costs
Total variable costs (TVC)
Economic Growth
Accounting Profit
Profit Maximizing Rule
12. The lost net benefit to society caused by a movement away from the competitive market equilibrium
Dead Weight Loss
Profit Maximizing Rule
Perfectly elastic
Inferior Goods
13. 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
Law of Demand
Monopoly long-run equilibrium
Short run
Relative Prices
14. Product demand - productivity - prices of other resources - and complementary resources
Determinants of Labor Demand
Four-firm concentration ratio
Long Run
Excise Tax
15. Entry of new firms shifts the cost curves for all firms downward
Allocative Efficiency
Decreasing Cost industry
Monopolistic competition
Relative Prices
16. All firms maximize profit by producing where MR = MC
Increasing Cost Industry
Marginal Resource Cost (MRC)
Price Elasticity of Supply
Profit Maximizing Rule
17. 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.
Monopolistic competition
Negative externality
Marginal Product of Labor (MPL)
Economies of Scale
18. AVC = TVC/Q
Income Effect
Average Variable Cost (AVC)
Market power
Explicit costs
19. Excess demand; a shortage exists at a market price when the quantity demanded exceeds the quantity supplied
Shortage
Total variable costs (TVC)
Substitution Effect
Marginal tax rate
20. Ed = 0 - no response to price change
Marginal Cost (MC)
Perfectly inelastic
Price elastic demand
Least-Cost Rule
21. 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
Producer surplus
Determinants of elasticity
Scarcity
Allocative Efficiency
22. Another way of saying that firms are earning zero economic profits or a fair rate of return on invested resources
Scarcity
Normal Profit
Marginal Product of Labor (MPL)
Utility Maximizing Rule
23. The output where ATC is minimized and economic profit is zero
Break-even Point
Monopsonist
Monopolistic competition
Marginal Revenue Product (MRP)
24. 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.
Complementary Goods
Unit elastic demand
Marginal Revenue Product (MRP)
Marginal Benefit (MB)
25. 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
Marginal tax rate
Normal Goods
Variable inputs
Derived Demand
26. The difference between the monopolistic competition output Qmc and the output at minimum ATC. Excess capacity is underused plant and equipment
Excess Capacity
Cartel
Market Equilibrium
Four-firm concentration ratio
27. A per unit tax on production results in a vertical shift in the supply curve by the amount of the tax
Price inelastic demand
Consumer surplus
Constant Returns to Scale
Excise Tax
28. The marginal utility from consumption of more and more of that item falls over time
Fixed inputs
Perfectly elastic
Absolute prices
Law of Diminishing Marginal Utility
29. The study of how people - firms - and societies use their scarce productive resources to best satisfy their unlimited material wants.
Increasing Cost Industry
Allocative Efficiency
Dead Weight Loss
Economics
30. 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
Relative Prices
Constrained Utility Maximization
Profit Maximizing Resource Employment
Economics
31. Models where firms agree to mutually improve their situation
Collusive oligopoly
Subsidy
Marginal Cost (MC)
Excess Capacity
32. Indirect - non-purchased - or opportunity costs of resources provided by the entrepreneur
Comparative Advantage
Determinants of Labor Demand
Increasing Cost Industry
Implicit costs
33. Holding all else equal - when the price of a good rises - suppliers increase their quantity supplied for that good
Total Revenue
Free-Rider Problem
Fixed inputs
Law of Supply
34. The additional cost incurred from the consumption of the next unit of a good or a service
Oligopoly
Marginal Cost (MC)
Price Elasticity of Supply
Necessity
35. Es = (%dQs) / (%dPrice)
Specialization
Price Elasticity of Supply
Necessity
Absolute prices
36. The most desirable alternative given up as the result of a decision
Scarcity
Constrained Utility Maximization
Market power
Opportunity Cost
37. Entry of new firms shifts the cost curves for all firms upward
Economic Profit
Marginal Analysis
Increasing Cost Industry
Allocative Efficiency
38. 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
Natural Monopoly
Substitute Goods
Least-Cost Rule
Positive externality
39. The rational decision maker chooses an action if MB = MC
Determinants of elasticity
Average Fixed Cost (AFC)
Average Product of Labor (APL)
Marginal Analysis
40. Consumer income - prices of substitute and complementary goods - consumer tastes and preferences - consumer speculation - and number of buyers in the market all influence demand
Marginal Analysis
Luxury
Determinants of Demand
Monopsonist
41. The change in quantity demanded resulting from a change in the price of one good relative to other goods
Scarcity
Average Total Cost (ATC)
Law of Increasing Costs
Substitution Effect
42. Exists at the point where the quantity supplied equals the quantity demanded
Market Equilibrium
Total Welfare
Market power
Economic Growth
43. 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.
Decreasing Cost industry
Diseconomies of Scale
Marginal Cost (MC)
Non-collusive oligopoly
44. An economic system based upon the fundamentals of private property - freedom - self-interest - and prices
Resources
Four-firm concentration ratio
Market Economy (Capitalism)
Marginal Analysis
45. The change in total product resulting from a change in the labor input. MPL = dTPL/dL - or the slope of total product
Marginal Analysis
Marginal Product of Labor (MPL)
Luxury
Law of Diminishing Marginal Utility
46. Ed = 1
Non-collusive oligopoly
Perfectly elastic
Unit elastic demand
Monopoly long-run equilibrium
47. When firms focus their resources on production of goods for which they have comparative advantage
Specialization
Unit elastic demand
Least-Cost Rule
Shortage
48. 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
Productive Efficiency
Marginal Analysis
Incidence of Tax
Fixed inputs
49. Exists when the production of a good creates utility for third parties not directly involved in the consumption of production of the good
Positive externality
Producer surplus
Perfectly elastic
Determinants of Demand
50. A good for which higher income increases demand
Profit Maximizing Resource Employment
Market power
Substitute Goods
Normal Goods