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AP Microeconomics

Subjects : economics, ap
Instructions:
  • Answer 50 questions in 15 minutes.
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  • Match each statement with the correct term.
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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. Occurs when there is no more incentive for firms to enter or exit. P=MR=MC=ATC and profit = 0






2. 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






3. Exists if a producer can produce a good at lower opportunity cost than all other producers






4. The output where ATC is minimized and economic profit is zero






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






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






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






8. 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.






9. 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






10. Es = (%dQs) / (%dPrice)






11. The additional benefit received from the consumption of the next unit of a good or service






12. 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






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






14. The total quantity - or total output of a good produced at each quantity of labor employed






15. The philosophy that a citizen should receive a share of economic resources proportional to the marginal revenue product of his or her productivity






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






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






18. 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






19. 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






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






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






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






23. AFC = TFC/Q






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






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






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






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






28. The difference between total revenue and total explicit costs






29. A good for which higher income decreases demand






30. AVC = TVC/Q






31. 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






32. 0 < Ei < 1






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






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






35. TR = P * Qd






36. 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.






37. The sum of consumer surplus and producer surplus






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






39. 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






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






41. 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






42. 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






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






44. Entry of new firms shifts the cost curves for all firms upward






45. Entry of new firms shifts the cost curves for all firms downward






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






47. 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






48. The practice of selling essentially the same good to different groups of consumers at different prices






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






50. 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







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