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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. 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






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






3. A good for which higher income decreases demand






4. The change in quantity demanded that results from a change in the consumer's purchasing power (or real income)






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






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






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






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






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






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






11. The difference between total revenue and total explicit costs






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






13. 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






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






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






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






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.






18. AVC = TVC/Q






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






20. Ed = 0 - no response to price change






21. 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






22. Another way of saying that firms are earning zero economic profits or a fair rate of return on invested resources






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






24. 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.






25. 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






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






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






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






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






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






31. Models where firms agree to mutually improve their situation






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






33. Holding all else equal - when the price of a good rises - suppliers increase their quantity supplied for that good






34. The additional cost incurred from the consumption of the next unit of a good or a service






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






36. The most desirable alternative given up as the result of a decision






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






38. 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






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






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






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






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






43. 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.






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






45. The change in total product resulting from a change in the labor input. MPL = dTPL/dL - or the slope of total product






46. Ed = 1






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






48. 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






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






50. A good for which higher income increases demand