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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. Ed = 0 - no response to price change






2. 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.






3. 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






4. Total product divided by labor employed. APL = TPL/L






5. The study of how people - firms - and societies use their scarce productive resources to best satisfy their unlimited material wants.






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






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






8. Production of maximum output for a given level of technology and resources. All points on the PPF are productively efficient






9. Entry (or exit) of firms does not shift the cost curves of firms in the industry






10. Models where firms agree to mutually improve their situation






11. The difference between total revenue and total explicit costs






12. 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.






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






14. The sum of consumer surplus and producer surplus






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






16. 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






17. Product demand - productivity - prices of other resources - and complementary resources






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






19. MUx / Px = MUy/Py or MUx/MUy = Px/Py






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






21. TR = P * Qd






22. Occurs when there is no more incentive for firms to enter or exit. P=MR=MC=ATC and profit = 0






23. The rational decision maker chooses an action if MB = MC






24. 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






25. 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






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






27. Exists when the production of a good creates utility for third parties not directly involved in the consumption of production of the good






28. Pmc < MR = MC and Pmc > minimum ATC so outcome is not efficient - but profit = 0.






29. 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






30. 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






31. 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






32. The ability to set the price above the perfectly competitive level






33. 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






34. A good for which higher income decreases demand






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






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






37. A firm that has market power in the factor market (a wage-setter)






38. AVC = TVC/Q






39. 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






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






41. 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






42. 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






43. The marginal utility from consumption of more and more of that item falls over time






44. Ei = (%dQd good X)/(%d Income)






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






46. Labor demand for the firm is MRPL curve. The labor demanded for the entire market DL = ?MRPL of all firms






47. 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






48. 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.






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






50. Costs that do not vary with changes in short-run output. They must be paid even when output is zero.