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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. 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






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






3. Ei > 1






4. 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






5. 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






6. Ed < 1






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






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






9. AFC = TFC/Q






10. 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






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






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






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






14. Occurs when there is no more incentive for firms to enter or exit. P=MR=MC=ATC and profit = 0






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






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






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






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






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






21. The difference between total revenue and total explicit costs






22. 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






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






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






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






26. 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






27. ATC = TC/Q = AFC + AVC






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






29. Models where firms agree to mutually improve their situation






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






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






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






33. Ed = 1






34. 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






35. 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






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






37. 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.






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






39. 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






40. 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






41. 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






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






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






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






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






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






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






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






49. 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






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







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