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






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






5. 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






6. The difference between total revenue and total explicit and implicit costs






7. 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






8. Ed < 1






9. Ed > 1 - meaning consumers are price sensitive






10. Excess demand; a shortage exists at a market price when the quantity demanded exceeds the quantity supplied






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






12. Ed = 1






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






14. Ed = (%dQd)/(%dP). Ignore negative sign






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






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






17. 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






18. The mechanism for combining production resources - with existing technology - into finished goods and services






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






20. 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






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






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






23. The difference between the price received and the marginal cost of producing the good. It is the area above the supply curve and under the price






24. Characterized by many small price-taking firms producing a standardized product in an industry in which there are no barriers to entry or exit






25. A very diverse market structure characterized by a small number of interdependent large firms - producing a standardized or differentiated product in a market with a barrier to entry






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






27. 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






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






29. All firms maximize profit by producing where MR = MC






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






31. 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






32. Factors of production - 4 categories: labor - physical capital - land/natural resources - and entrepreneurial ability






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






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






35. 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






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






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






38. The least competitive market structure - characterized by a single producer - with no close substitutes - barriers to entry - and price making power






39. 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.






40. Ei > 1






41. Ed = 0 - no response to price change






42. 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






43. The difference between the monopolistic competition output Qmc and the output at minimum ATC. Excess capacity is underused plant and equipment






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






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






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






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






48. When firms focus their resources on production of goods for which they have comparative advantage






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






50. Occurs when an economy's production possibilities increase. This can be a result of more resources - better resources - or improvements in technology.