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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. AFC = TFC/Q






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






3. Ed > 1 - meaning consumers are price sensitive






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






5. The imbalance between limited productive resources and unlimited human wants






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






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






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






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






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






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






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






13. 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






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






15. 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.






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






17. 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






18. 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






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






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






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






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






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






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






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






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






27. 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






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






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






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






31. 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






32. 0 < Ei < 1






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






34. 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






35. 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






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






37. 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






38. A market structure characterized by a few small firms producing a differentiated product with easy entry into the market






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






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






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






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






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.






44. Ei > 1






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






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






47. Ed < 1






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






49. Ed = 0 - no response to price change






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