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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. ATC = TC/Q = AFC + AVC
Utility Maximizing Rule
Income Elasticity
Average Total Cost (ATC)
Consumer surplus
2. Consumer income - prices of substitute and complementary goods - consumer tastes and preferences - consumer speculation - and number of buyers in the market all influence demand
Constrained Utility Maximization
Determinants of Demand
Total Product of Labor (TPL)
Resources
3. Another way of saying that firms are earning zero economic profits or a fair rate of return on invested resources
Normal Profit
Cartel
Shutdown Point
Economic Profit
4. Pmc < MR = MC and Pmc > minimum ATC so outcome is not efficient - but profit = 0.
Monopolistic competition long-run equilibrium
Surplus
Total Product of Labor (TPL)
Determinants of elasticity
5. 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
Spillover benefits
Complementary Goods
Short run
Surplus
6. Entry of new firms shifts the cost curves for all firms upward
Subsidy
Increasing Cost Industry
Profit Maximizing Resource Employment
Law of Supply
7. When firms focus their resources on production of goods for which they have comparative advantage
Law of Demand
Fixed inputs
Specialization
Perfectly competitive long-run equilibrium
8. 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.
Long Run
Economics
Economies of Scale
Relative Prices
9. The total quantity - or total output of a good produced at each quantity of labor employed
Shutdown Point
Surplus
Decreasing Cost industry
Total Product of Labor (TPL)
10. Ed = (%dQd)/(%dP). Ignore negative sign
Average Variable Cost (AVC)
Derived Demand
Price elasticity
Price floor
11. The practice of selling essentially the same good to different groups of consumers at different prices
Price discrimination
Constrained Utility Maximization
Free-Rider Problem
Opportunity Cost
12. The firm hires the profit maximizing amount of a resource at the point where MRP = MRC
Profit Maximizing Resource Employment
Perfectly elastic
Decreasing Cost industry
Absolute prices
13. AFC = TFC/Q
Economic Growth
Complementary Goods
Average Fixed Cost (AFC)
Total variable costs (TVC)
14. 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
Productive Efficiency
Derived Demand
Marginal Productivity Theory
Price floor
15. 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
Monopoly
Accounting Profit
Constrained Utility Maximization
Economies of Scale
16. 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
Total variable costs (TVC)
Oligopoly
Absolute prices
Price Ceiling
17. The imbalance between limited productive resources and unlimited human wants
Economic Growth
Law of Supply
Scarcity
Production function
18. Models where firms agree to mutually improve their situation
Collusive oligopoly
Constrained Utility Maximization
Resources
Necessity
19. 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
Perfectly inelastic
Shutdown Point
Constant Returns to Scale
Shortage
20. The difference between the monopolistic competition output Qmc and the output at minimum ATC. Excess capacity is underused plant and equipment
Price elastic demand
Scarcity
Excess Capacity
Perfect competition
21. The additional cost incurred from the consumption of the next unit of a good or a service
Luxury
Total Fixed Costs (TFC)
Monopsonist
Marginal Cost (MC)
22. The change in total product resulting from a change in the labor input. MPL = dTPL/dL - or the slope of total product
Price elasticity
Economic Profit
Collusive oligopoly
Marginal Product of Labor (MPL)
23. Holding all else equal - when the price of a good rises - consumers decrease their quantity demanded for that good
Law of Demand
Monopolistic competition
Marginal Productivity Theory
Average Fixed Cost (AFC)
24. Two goods are consumer complements if they provide more utility when consumed together than when consumed separately
Resources
Complementary Goods
Substitute Goods
Perfectly inelastic
25. Total revenue rises with a price increase if demand is price inelastic and falls with a price increase if demand is price elastic
Price Elasticity of Supply
Perfectly competitive long-run equilibrium
Total Revenue Test
Complementary Goods
26. 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
Price Ceiling
Determinants of Demand
Positive externality
Least-Cost Rule
27. The price of a good measured in units of currency
Producer surplus
Absolute prices
Variable inputs
Utility Maximizing Rule
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
Natural Monopoly
Variable inputs
Unit elastic demand
Relative Prices
29. The ability to set the price above the perfectly competitive level
Determinants of Demand
Necessity
Market power
Determinants of elasticity
30. Ed = 0 - no response to price change
Producer surplus
Total Revenue Test
Law of Increasing Costs
Perfectly inelastic
31. Costs that change with the level of output. If output is zero - so are TVCs.
Derived Demand
Demand for Labor
Economic Growth
Total variable costs (TVC)
32. 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
Total Revenue
Profit Maximizing Resource Employment
Law of Demand
Short run
33. The marginal utility from consumption of more and more of that item falls over time
Law of Diminishing Marginal Utility
Perfect competition
Negative externality
Marginal Resource Cost (MRC)
34. All firms maximize profit by producing where MR = MC
Total Revenue Test
Long Run
Profit Maximizing Rule
Average Total Cost (ATC)
35. Occurs when LRAC is constant over a variety of plant sizes
Constant Returns to Scale
Absolute Advantage
Marginal Resource Cost (MRC)
Economic Profit
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
Four-firm concentration ratio
Price floor
Oligopoly
Price elastic demand
37. Characterized by many small price-taking firms producing a standardized product in an industry in which there are no barriers to entry or exit
Marginal Cost (MC)
Increasing Cost Industry
Perfect competition
Cartel
38. Indirect - non-purchased - or opportunity costs of resources provided by the entrepreneur
Average Fixed Cost (AFC)
Implicit costs
Perfectly competitive long-run equilibrium
Derived Demand
39. Substitutes - cost as percentage of income - and time to adjust to price changes all influence price elasticity
Incidence of Tax
Break-even Point
Determinants of elasticity
Negative externality
40. The difference between total revenue and total explicit costs
Accounting Profit
Derived Demand
Determinants of Labor Demand
Relative Prices
41. Ed < 1
Shutdown Point
Complementary Goods
Total Revenue Test
Price inelastic demand
42. Labor demand for the firm is MRPL curve. The labor demanded for the entire market DL = ?MRPL of all firms
Price inelastic demand
Demand for Labor
Monopoly
Excess Capacity
43. In the case of a public good - some members of the community know that they can consume the public good while others provide for it. This results in a lack of private funding and forces the government to provide it
Constrained Utility Maximization
Shutdown Point
Free-Rider Problem
Positive externality
44. 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
Variable inputs
Diseconomies of Scale
Complementary Goods
Price discrimination
45. The least competitive market structure - characterized by a single producer - with no close substitutes - barriers to entry - and price making power
Negative externality
Determinants of Demand
Monopoly
Law of Diminishing Marginal Utility
46. The additional benefit received from the consumption of the next unit of a good or service
Marginal Benefit (MB)
Normal Goods
Necessity
Substitute Goods
47. Entry (or exit) of firms does not shift the cost curves of firms in the industry
Relative Prices
Price Ceiling
Constant cost industry
Natural Monopoly
48. 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
Normal Goods
Determinants of Labor Demand
Price discrimination
Allocative Efficiency
49. Two goods are consumer substitutes if they provide essentially the same utility to consumers
Substitute Goods
Luxury
Private goods
Total Revenue Test
50. The change in quantity demanded that results from a change in the consumer's purchasing power (or real income)
Income Effect
Perfectly elastic
Income Elasticity
Average Variable Cost (AVC)