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AP Microeconomics
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economics
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ap
Instructions:
Answer 50 questions in 15 minutes.
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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 per unit tax on production results in a vertical shift in the supply curve by the amount of the tax
Explicit costs
Public goods
Spillover costs
Excise Tax
2. The philosophy that a citizen should receive a share of economic resources proportional to the marginal revenue product of his or her productivity
Diseconomies of Scale
Marginal Revenue Product (MRP)
Determinants of Demand
Marginal Productivity Theory
3. 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
Perfect competition
Cross-Price Elasticity of Demand
Price inelastic demand
Allocative Efficiency
4. The marginal utility from consumption of more and more of that item falls over time
Economies of Scale
Price Elasticity of Supply
Law of Diminishing Marginal Utility
Average Fixed Cost (AFC)
5. The additional cost incurred from the consumption of the next unit of a good or a service
Marginal Cost (MC)
Market power
Monopoly long-run equilibrium
Incidence of Tax
6. Exists if a producer can produce more of a good than all other producers
Marginal tax rate
Shortage
Break-even Point
Absolute Advantage
7. 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
Price Elasticity of Supply
Monopsonist
Unit elastic demand
Short run
8. 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
Inferior Goods
Constant Returns to Scale
Fixed inputs
Variable inputs
9. Excess demand; a shortage exists at a market price when the quantity demanded exceeds the quantity supplied
Relative Prices
Shortage
Law of Increasing Costs
Price Elasticity of Supply
10. The study of how people - firms - and societies use their scarce productive resources to best satisfy their unlimited material wants.
Monopoly long-run equilibrium
Unit elastic demand
Constrained Utility Maximization
Economics
11. 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
Normal Goods
Determinants of Supply
Monopsonist
Monopolistic competition long-run equilibrium
12. 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
Marginal Resource Cost (MRC)
Economics
Average Product of Labor (APL)
Law of Diminishing Marginal Utility
13. Ei > 1
Break-even Point
Average Product of Labor (APL)
Luxury
Marginal Product of Labor (MPL)
14. The lost net benefit to society caused by a movement away from the competitive market equilibrium
Marginal Analysis
Monopsonist
Dead Weight Loss
Shortage
15. The ability to set the price above the perfectly competitive level
Market power
Inferior Goods
Price Ceiling
Least-Cost Rule
16. The case where economies of scale are so extensive that it is less costly for one firm to supply the entire range of demand
Natural Monopoly
Unit elastic demand
Incidence of Tax
Monopoly
17. 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
Constrained Utility Maximization
Cross-Price Elasticity of Demand
Free-Rider Problem
Substitution Effect
18. The difference between total revenue and total explicit costs
Accounting Profit
Absolute Advantage
Perfectly inelastic
Perfectly competitive long-run equilibrium
19. Models where firms agree to mutually improve their situation
Collusive oligopoly
Market Economy (Capitalism)
Price elasticity
Total Revenue
20. The additional benefit received from the consumption of the next unit of a good or service
Complementary Goods
Excess Capacity
Marginal Benefit (MB)
Marginal Cost (MC)
21. The change in quantity demanded resulting from a change in the price of one good relative to other goods
Derived Demand
Absolute Advantage
Monopoly long-run equilibrium
Substitution Effect
22. Factors of production - 4 categories: labor - physical capital - land/natural resources - and entrepreneurial ability
Marginal Benefit (MB)
Specialization
Variable inputs
Resources
23. 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.
Constant Returns to Scale
Marginal Resource Cost (MRC)
Luxury
Economies of Scale
24. The more of a good that is produced - the greater the opportunity cost of producing the next unit of that good
Law of Increasing Costs
Scarcity
Marginal Benefit (MB)
Marginal Productivity Theory
25. 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
Implicit costs
Non-collusive oligopoly
Least-Cost Rule
Total Product of Labor (TPL)
26. Another way of saying that firms are earning zero economic profits or a fair rate of return on invested resources
Spillover costs
Complementary Goods
Income Elasticity
Normal Profit
27. An economic system based upon the fundamentals of private property - freedom - self-interest - and prices
Non-collusive oligopoly
Price floor
Total Fixed Costs (TFC)
Market Economy (Capitalism)
28. Occurs when an economy's production possibilities increase. This can be a result of more resources - better resources - or improvements in technology.
Economic Growth
Monopoly
Accounting Profit
Price discrimination
29. All firms maximize profit by producing where MR = MC
Monopoly
Economies of Scale
Four-firm concentration ratio
Profit Maximizing Rule
30. A good for which higher income increases demand
Subsidy
Normal Goods
Total Fixed Costs (TFC)
Natural Monopoly
31. 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
Consumer surplus
Total Fixed Costs (TFC)
Average Total Cost (ATC)
Market Equilibrium
32. Ex -y = (%dQd good X) / (%d Price Y). If Ex -y > 0 - goods X and Y are substitutes. If Ex -y < 0 - goods X and Y are complementary
Law of Diminishing Marginal Utility
Cross-Price Elasticity of Demand
Perfectly elastic
Absolute Advantage
33. Ed > 1 - meaning consumers are price sensitive
Price elastic demand
Productive Efficiency
Average Product of Labor (APL)
Monopoly
34. A legal maximum price above which the product cannot be sold. If a floor is installed at some level above the equilibrium price - it creates a permanent shortage
Relative Prices
Necessity
Law of Supply
Price Ceiling
35. Models where firms are competitive rivals seeking to gain at the expense of their rivals
Perfectly inelastic
Non-collusive oligopoly
Long Run
Substitution Effect
36. When firms focus their resources on production of goods for which they have comparative advantage
Total Revenue
Marginal Analysis
Specialization
Private goods
37. Exists when the production of a good creates utility for third parties not directly involved in the consumption of production of the good
Price discrimination
Complementary Goods
Marginal Product of Labor (MPL)
Positive externality
38. The practice of selling essentially the same good to different groups of consumers at different prices
Price discrimination
Oligopoly
Constrained Utility Maximization
Total Product of Labor (TPL)
39. Ed = 0 - no response to price change
Comparative Advantage
Shortage
Public goods
Perfectly inelastic
40. Pmc < MR = MC and Pmc > minimum ATC so outcome is not efficient - but profit = 0.
Implicit costs
Non-collusive oligopoly
Market Economy (Capitalism)
Monopolistic competition long-run equilibrium
41. 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
Monopoly long-run equilibrium
Price elasticity
Average Total Cost (ATC)
Substitution Effect
42. The number of units of any other good Y that must be sacrificed to acquire good X. Only relative prices matter
Surplus
Opportunity Cost
Relative Prices
Short run
43. The firm hires the profit maximizing amount of a resource at the point where MRP = MRC
Spillover costs
Unit elastic demand
Profit Maximizing Resource Employment
Monopoly
44. Excess supply; exists at a market price when the quantity supplied exceeds the quantity demanded.
Excise Tax
Perfectly inelastic
Surplus
Utility Maximizing Rule
45. 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
Spillover benefits
Absolute prices
Economies of Scale
Perfect competition
46. Occurs when LRAC is constant over a variety of plant sizes
Constant Returns to Scale
Relative Prices
Constrained Utility Maximization
Total variable costs (TVC)
47. A period of time long enough to alter the plant size. New firms can enter the industry and existing firms can liquidate and exit
Long Run
Derived Demand
Scarcity
Accounting Profit
48. 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
Positive externality
Public goods
Subsidy
Total Welfare
49. A firm that has market power in the factor market (a wage-setter)
Monopoly
Decreasing Cost industry
Spillover benefits
Monopsonist
50. Total revenue rises with a price increase if demand is price inelastic and falls with a price increase if demand is price elastic
Accounting Profit
Profit Maximizing Resource Employment
Consumer surplus
Total Revenue Test
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