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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. 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






2. 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






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






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






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






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






7. 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






8. Models where firms agree to mutually improve their situation






9. 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






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






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






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






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






14. The imbalance between limited productive resources and unlimited human wants






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






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.






17. An economic system based upon the fundamentals of private property - freedom - self-interest - and prices






18. The lost net benefit to society caused by a movement away from the competitive market equilibrium






19. The sum of consumer surplus and producer surplus






20. 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.






21. 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






22. A good for which higher income increases demand






23. 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






24. 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.






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






26. 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






27. Two goods are consumer substitutes if they provide essentially the same utility to consumers






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






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






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






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






32. The difference between total revenue and total explicit costs






33. 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






34. AVC = TVC/Q






35. 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






36. 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






37. 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






38. Ed > 1 - meaning consumers are price sensitive






39. Ed < 1






40. 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






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






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






43. Exists at the point where the quantity supplied equals the quantity demanded






44. TR = P * Qd






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






46. 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






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






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






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






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