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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. Entry of new firms shifts the cost curves for all firms downward
Diseconomies of Scale
Market power
Inferior Goods
Decreasing Cost industry
2. Exists if a producer can produce a good at lower opportunity cost than all other producers
Short run
Total variable costs (TVC)
Comparative Advantage
Surplus
3. Ei > 1
Price inelastic demand
Marginal Productivity Theory
Luxury
Resources
4. A market structure characterized by a few small firms producing a differentiated product with easy entry into the market
Average Product of Labor (APL)
Monopolistic competition
Opportunity Cost
Spillover costs
5. The marginal utility from consumption of more and more of that item falls over time
Shortage
Opportunity Cost
Absolute Advantage
Law of Diminishing Marginal Utility
6. Occurs when there is no more incentive for firms to enter or exit. P=MR=MC=ATC and profit = 0
Collusive oligopoly
Perfectly competitive long-run equilibrium
Resources
Price Elasticity of Supply
7. Exists when the production of a good imposes disutility upon third parties not directly involved in the consumption or production of the good
Average Total Cost (ATC)
Negative externality
Law of Demand
Decreasing Cost industry
8. AFC = TFC/Q
Average Fixed Cost (AFC)
Determinants of Supply
Marginal Product of Labor (MPL)
Marginal Productivity Theory
9. Costs that do not vary with changes in short-run output. They must be paid even when output is zero.
Perfectly competitive long-run equilibrium
Least-Cost Rule
Total Fixed Costs (TFC)
Incidence of Tax
10. Entry (or exit) of firms does not shift the cost curves of firms in the industry
Constant cost industry
Spillover benefits
Cross-Price Elasticity of Demand
Economics
11. A group of firms that agree not to compete with each other on the basis of price - production - or other competitive dimensions. Cartel members operate as a monopolist to maximize their joint profits
Public goods
Excise Tax
Scarcity
Cartel
12. The change in quantity demanded that results from a change in the consumer's purchasing power (or real income)
Accounting Profit
Income Effect
Law of Supply
Monopolistic competition
13. The more of a good that is produced - the greater the opportunity cost of producing the next unit of that good
Marginal Revenue Product (MRP)
Law of Increasing Costs
Price Elasticity of Supply
Constant cost industry
14. The least competitive market structure - characterized by a single producer - with no close substitutes - barriers to entry - and price making power
Monopolistic competition long-run equilibrium
Monopoly
Excise Tax
Price Ceiling
15. The difference between your willingness to pay and the price you actually pay. It is the area below the demand curve and above the price
Marginal Benefit (MB)
Cartel
Private goods
Consumer surplus
16. 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.
Total Product of Labor (TPL)
Decreasing Cost industry
Marginal Revenue Product (MRP)
Short run
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.
Spillover benefits
Economies of Scale
Shortage
Decreasing Cost industry
18. The case where economies of scale are so extensive that it is less costly for one firm to supply the entire range of demand
Opportunity Cost
Increasing Cost Industry
Law of Diminishing Marginal Utility
Natural Monopoly
19. 0 < Ei < 1
Complementary Goods
Price elastic demand
Necessity
Price floor
20. 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
Marginal Cost (MC)
Productive Efficiency
Opportunity Cost
Free-Rider Problem
21. Ed = 1
Fixed inputs
Variable inputs
Four-firm concentration ratio
Unit elastic demand
22. 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
Monopoly long-run equilibrium
Oligopoly
Break-even Point
Spillover benefits
23. Total revenue rises with a price increase if demand is price inelastic and falls with a price increase if demand is price elastic
Specialization
Normal Profit
Law of Supply
Total Revenue Test
24. Ed = (%dQd)/(%dP). Ignore negative sign
Average Total Cost (ATC)
Marginal Resource Cost (MRC)
Price elasticity
Market Equilibrium
25. 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
Private goods
Explicit costs
Spillover benefits
Profit Maximizing Rule
26. The sum of consumer surplus and producer surplus
Necessity
Resources
Decreasing Cost industry
Total Welfare
27. A good for which higher income decreases demand
Subsidy
Demand for Labor
Inferior Goods
Producer surplus
28. Another way of saying that firms are earning zero economic profits or a fair rate of return on invested resources
Diseconomies of Scale
Derived Demand
Positive externality
Normal Profit
29. Labor demand for the firm is MRPL curve. The labor demanded for the entire market DL = ?MRPL of all firms
Implicit costs
Demand for Labor
Absolute prices
Normal Profit
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
Monopoly
Constrained Utility Maximization
Increasing Cost Industry
Monopsonist
31. Ed > 1 - meaning consumers are price sensitive
Monopoly
Necessity
Monopolistic competition
Price elastic demand
32. 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
Resources
Price inelastic demand
Average Product of Labor (APL)
Price Ceiling
33. 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
Long Run
Price floor
Marginal Cost (MC)
Incidence of Tax
34. Total product divided by labor employed. APL = TPL/L
Spillover costs
Average Product of Labor (APL)
Cartel
Increasing Cost Industry
35. 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
Average Product of Labor (APL)
Shutdown Point
Opportunity Cost
Producer surplus
36. MUx / Px = MUy/Py or MUx/MUy = Px/Py
Price Elasticity of Supply
Marginal Product of Labor (MPL)
Utility Maximizing Rule
Inferior Goods
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
Perfect competition
Total Product of Labor (TPL)
Non-collusive oligopoly
Resources
38. Ed = 8 - infinite change in demand to price change
Market power
Profit Maximizing Resource Employment
Perfectly elastic
Total Revenue Test
39. Ei = (%dQd good X)/(%d Income)
Positive externality
Resources
Income Elasticity
Fixed inputs
40. Production of maximum output for a given level of technology and resources. All points on the PPF are productively efficient
Implicit costs
Marginal Cost (MC)
Productive Efficiency
Average Variable Cost (AVC)
41. 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
Luxury
Income Elasticity
Utility Maximizing Rule
Marginal tax rate
42. Models where firms are competitive rivals seeking to gain at the expense of their rivals
Substitute Goods
Non-collusive oligopoly
Constant cost industry
Average Product of Labor (APL)
43. The additional benefit received from the consumption of the next unit of a good or service
Total Revenue Test
Producer surplus
Marginal Benefit (MB)
Profit Maximizing Rule
44. The rational decision maker chooses an action if MB = MC
Positive externality
Marginal Analysis
Total Revenue Test
Price elasticity
45. Excess demand; a shortage exists at a market price when the quantity demanded exceeds the quantity supplied
Negative externality
Positive externality
Shortage
Price Ceiling
46. Ed = 0 - no response to price change
Economic Growth
Explicit costs
Long Run
Perfectly inelastic
47. 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
Determinants of Supply
Economic Profit
Cartel
Price inelastic demand
48. 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
Fixed inputs
Short run
Constant Returns to Scale
Marginal Resource Cost (MRC)
49. The number of units of any other good Y that must be sacrificed to acquire good X. Only relative prices matter
Allocative Efficiency
Relative Prices
Positive externality
Monopolistic competition
50. Two goods are consumer complements if they provide more utility when consumed together than when consumed separately
Production function
Consumer surplus
Complementary Goods
Law of Demand