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Test your basic knowledge |
AP Microeconomics
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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. Total product divided by labor employed. APL = TPL/L
Variable inputs
Average Product of Labor (APL)
Total Fixed Costs (TFC)
Constrained Utility Maximization
2. 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
Marginal Resource Cost (MRC)
Natural Monopoly
Collusive oligopoly
Consumer surplus
3. Occurs when there is no more incentive for firms to enter or exit. P=MR=MC=ATC and profit = 0
Spillover benefits
Perfectly competitive long-run equilibrium
Monopsonist
Price floor
4. Total revenue rises with a price increase if demand is price inelastic and falls with a price increase if demand is price elastic
Market Equilibrium
Determinants of Labor Demand
Total Revenue Test
Least-Cost Rule
5. Two goods are consumer complements if they provide more utility when consumed together than when consumed separately
Comparative Advantage
Substitute Goods
Demand for Labor
Complementary Goods
6. Ed > 1 - meaning consumers are price sensitive
Average Fixed Cost (AFC)
Unit elastic demand
Producer surplus
Price elastic demand
7. 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 Productivity Theory
Oligopoly
Resources
Marginal tax rate
8. Characterized by many small price-taking firms producing a standardized product in an industry in which there are no barriers to entry or exit
Perfect competition
Least-Cost Rule
Public goods
Perfectly elastic
9. Exists if a producer can produce a good at lower opportunity cost than all other producers
Comparative Advantage
Average Product of Labor (APL)
Price inelastic demand
Average Total Cost (ATC)
10. Ei > 1
Price inelastic demand
Luxury
Long Run
Average Product of Labor (APL)
11. The sum of consumer surplus and producer surplus
Marginal Resource Cost (MRC)
Determinants of Labor Demand
Constrained Utility Maximization
Total Welfare
12. Models where firms agree to mutually improve their situation
Luxury
Law of Diminishing Marginal Utility
Collusive oligopoly
Complementary Goods
13. Production inputs that cannot be changed in the short run. Usually this is the plant size or capital
Decreasing Cost industry
Unit elastic demand
Relative Prices
Fixed inputs
14. The marginal utility from consumption of more and more of that item falls over time
Collusive oligopoly
Total variable costs (TVC)
Law of Diminishing Marginal Utility
Specialization
15. An economic system based upon the fundamentals of private property - freedom - self-interest - and prices
Private goods
Market Economy (Capitalism)
Profit Maximizing Resource Employment
Price elastic demand
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
Increasing Cost Industry
Average Total Cost (ATC)
Marginal Revenue Product (MRP)
Price Ceiling
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.
Price discrimination
Economies of Scale
Market Economy (Capitalism)
Cross-Price Elasticity of Demand
18. 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
Monopsonist
Marginal Product of Labor (MPL)
Public goods
Constrained Utility Maximization
19. Pm > MR = MC - which is not allocatively efficient and dead weight loss exists. Pm > ATC - which is not productively efficient. Profit > 0 so consumer surplus is transferred to the monopolist as profit
Natural Monopoly
Monopoly long-run equilibrium
Determinants of Supply
Price discrimination
20. 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.
Luxury
Marginal Revenue Product (MRP)
Increasing Cost Industry
Substitution Effect
21. The change in quantity demanded resulting from a change in the price of one good relative to other goods
Marginal Benefit (MB)
Accounting Profit
Inferior Goods
Substitution Effect
22. MUx / Px = MUy/Py or MUx/MUy = Px/Py
Least-Cost Rule
Consumer surplus
Utility Maximizing Rule
Total Revenue Test
23. The additional benefit received from the consumption of the next unit of a good or service
Free-Rider Problem
Price Ceiling
Marginal Benefit (MB)
Determinants of Supply
24. The total quantity - or total output of a good produced at each quantity of labor employed
Determinants of Supply
Total Product of Labor (TPL)
Determinants of Demand
Production function
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.
Diseconomies of Scale
Spillover costs
Price Ceiling
Total Welfare
26. Demand for a resource like labor is derived from the demand for the goods produced by the resource
Positive externality
Derived Demand
Determinants of Supply
Total Welfare
27. Costs of inputs - technology and productivity - taxes/subsidies - producer speculation - price of other goods that could be produced - and number of sellers all influence supply
Total Product of Labor (TPL)
Long Run
Unit elastic demand
Determinants of Supply
28. Holding all else equal - when the price of a good rises - consumers decrease their quantity demanded for that good
Monopoly long-run equilibrium
Economic Profit
Income Effect
Law of Demand
29. The difference between total revenue and total explicit costs
Accounting Profit
Normal Goods
Total Fixed Costs (TFC)
Economies of Scale
30. A good for which higher income decreases demand
Inferior Goods
Necessity
Economics
Income Elasticity
31. Exists at the point where the quantity supplied equals the quantity demanded
Substitute Goods
Incidence of Tax
Shutdown Point
Market Equilibrium
32. Costs that do not vary with changes in short-run output. They must be paid even when output is zero.
Determinants of elasticity
Total Fixed Costs (TFC)
Resources
Perfect competition
33. Ed = 0 - no response to price change
Opportunity Cost
Inferior Goods
Resources
Perfectly inelastic
34. 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
Law of Increasing Costs
Least-Cost Rule
Constrained Utility Maximization
Variable inputs
35. Exists when the production of a good imposes disutility upon third parties not directly involved in the consumption or production of the good
Constant Returns to Scale
Utility Maximizing Rule
Negative externality
Law of Demand
36. ATC = TC/Q = AFC + AVC
Average Total Cost (ATC)
Accounting Profit
Perfectly elastic
Determinants of Labor Demand
37. The least competitive market structure - characterized by a single producer - with no close substitutes - barriers to entry - and price making power
Monopsonist
Monopoly
Perfect competition
Monopolistic competition long-run equilibrium
38. 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
Shutdown Point
Necessity
Total variable costs (TVC)
Free-Rider Problem
39. 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
Shutdown Point
Allocative Efficiency
Market Economy (Capitalism)
Necessity
40. Exists if a producer can produce more of a good than all other producers
Monopoly long-run equilibrium
Subsidy
Constant cost industry
Absolute Advantage
41. When firms focus their resources on production of goods for which they have comparative advantage
Shutdown Point
Economics
Least-Cost Rule
Specialization
42. 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
Economic Profit
Spillover benefits
Private goods
Cross-Price Elasticity of Demand
43. 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
Absolute prices
Total Revenue Test
Spillover costs
Opportunity Cost
44. Factors of production - 4 categories: labor - physical capital - land/natural resources - and entrepreneurial ability
Inferior Goods
Resources
Long Run
Economic Profit
45. The lost net benefit to society caused by a movement away from the competitive market equilibrium
Marginal Analysis
Average Total Cost (ATC)
Economic Profit
Dead Weight Loss
46. Pmc < MR = MC and Pmc > minimum ATC so outcome is not efficient - but profit = 0.
Normal Profit
Monopolistic competition long-run equilibrium
Variable inputs
Market power
47. Entry of new firms shifts the cost curves for all firms upward
Derived Demand
Increasing Cost Industry
Economies of Scale
Specialization
48. A per unit tax on production results in a vertical shift in the supply curve by the amount of the tax
Excise Tax
Demand for Labor
Resources
Subsidy
49. The case where economies of scale are so extensive that it is less costly for one firm to supply the entire range of demand
Decreasing Cost industry
Dead Weight Loss
Marginal Analysis
Natural Monopoly
50. The additional cost incurred from the consumption of the next unit of a good or a service
Marginal Cost (MC)
Luxury
Marginal Analysis
Spillover benefits