AP Microeconomics: Unit 1, AP Microeconomics: Unit 2, AP Micro Unit 3, AP Micro Unit 4: Imperfect Competition

question

Economics

answer

how an individual in society experiences limitless wants, and chooses to allocate its limited resources to satisfy wants

question

ATC

answer

total cost divided by the quantity of output

question

Monopoly

answer

A market structure which has one firm

question

shifters of the supply curve

answer

Technology, input prices, related prices, expectations, sellers.

question

productive efficiency

answer

the production of any particular good in the least costly way

question

normal goods

answer

Demand for them increases as income increases.

question

AVC

answer

TVC/Q

question

monopolistic competition

answer

a market structure in which many companies sell products that are similar but not identical

question

AFC

answer

ATC-AVC

question

Oligopoly

answer

A market structure in which a few large firms dominate a market

question

inferior goods

answer

Demand for them decreases as income increases.

question

Opportunity Cost

answer

what one sacrifices in order to obtain what one wants

question

Marginal

answer

Extra or additional

question

substitutes

answer

As price of a good X increases, demand for product Y increases.

question

marginal cost

answer

Extra cost of producing one additional unit of production.

question

perfect competition

answer

a market structure in which a large number of firms all produce the same product

question

Market Economy

answer

Decisions of individual producers and consumers largely determine what, how, and for whom to produce, with little government involvement in decisions

question

complements

answer

As price of good X increases, demand for good Y decreases.

question

Shape of AFC curve

answer

Continuously decreases as more units of output are produced

question

deadweight loss

answer

the total loss of producer and consumer surplus from underproduction or overproduction

question

Shape of MC curve

answer

Decreases and then increases due to Diminishing Marginal Returns

question

productive efficiency

answer

P = minimum ATC

question

change in demand/supply

answer

Shift of curve

question

Shape of ATC and AVC

answer

U-shaped and the minimum goes through MC

question

change in quantity demanded/supplied

answer

Movement along curve

question

Profit Maximizing Rule

answer

MR=MC

question

Command Economic System

answer

Government decides what goods/services are needed

question

Total Revenue Maximization

answer

When MR = 0

question

short run

answer

the period of time during which at least one of a firm's inputs is fixed

question

answer

ATC * Q

question

socially optimal price (allocative efficiency)

answer

P = MC

question

economies of scale

answer

a producer's long-run average total cost falls as output rises

question

Mixed Economic System

answer

Producers, consumers, and government answers economic questions

question

fair-return price

answer

P = ATC

question

Scarcity

answer

Limited amount of a desired resource

question

monopoly unregulated price

answer

Go to MR=MC and then up to the Demand curve to find the price

question

diseconomies of scale

answer

a producer's long-run average total cost increases as output rises

question

market size

answer

Number of consumers. As number of consumers increases, so does demand.

question

expectations (demand)

answer

Presumptions made by consumers. If people expect a price to rise, demand increases. If they expect a price to fall, demand decreases.

question

constant returns to scale

answer

long-run average total cost stays the same as the quantity of output changes

question

Barriers to entry in a monopoly market

answer

ownership of a key resource or patent

question

marginal revenue

answer

the additional revenue from selling one more unit of output

question

Land

answer

Anything that comes from the earth

question

tastes and preferences

answer

As preferences for a product grow, so does demand.

question

long run

answer

the time period in which all resources are variable

question

Law of Diminishing Marginal Returns

answer

As more of a variable resource is added to a given amount of a fixed resource, marginal product eventually declines

question

Labor

answer

Payment for salary and wages

question

law of demand

answer

As price increases, quantity decreases.

question

Total Revenue

answer

Price * Quantity

question

variable costs

answer

costs that vary directly with the level of production

question

law of supply

answer

As price increases, quantity increases.

question

Phyiscal capital

answer

Goods that produce other goods for future use

question

Total Cost

answer

ATC * Q

question

Entrepreneurship

answer

Person who takes on risk to start a business

question

fixed costs

answer

costs that remain constant as output changes

question

Increase in fixed costs

answer

shifts AFC and ATC upward

question

Profit

answer

P > ATC

question

technology

answer

New, more efficient technology increases supply.

question

Decrease in fixed costs

answer

shifts AFC and ATC downward

question

Normal Profit

answer

An economic profit of zero

question

Increase in variable costs

answer

shifts AVC, ATC, and MC upward

question

Elastic range of demand curve

answer

MR is positive

question

equilibrium

answer

When quantity supplied = quantity demanded.

question

Decrease in variable costs

answer

shifts AVC, ATC, and MC downward

question

Inelastic range of demand curve

answer

MR is negative

question

Microeconomics

answer

Study of how individuals make decisions and how those decisions interact

question

TR Test : Inelastic demand

answer

Price decreases and TR decreases

question

TVC

answer

AVC * Q

question

TR Test: Elastic Demand

answer

Price decreases and TR increases

question

TFC

answer

AFC * Q

question

Macroeconomics

answer

Concerned with overall ups and downs in the economy

question

shortage

answer

Quantity demanded is greater than quantity supplied.

question

consumer surplus

answer

the amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it

question

perfect competition

answer

a market structure in which a large number of firms all produce the same product

question

surplus

answer

Quantity supplied is greater than quantity demanded

question

producer surplus

answer

the amount a seller is paid for a good minus the seller's cost of providing it

question

Perfect Competition in the Long Run

answer

normal profit

question

price controls

answer

Legal restrictions on how high or low a market price can go. Price ceilings and floors.

question

price ceilings

answer

A maximum price that sellers are allowed to charge. Only efficient if it's below equilibrium.

question

Perfect Competition Demand Curve

answer

perfectly elastic

question

marginal revenue

answer

equals the market price in perfect competition

question

Trade-off

answer

All the things given up to get what you want

question

price floors

answer

A minimum price buyers are allowed to pay for a good or service. Only efficient if it's above equilibrium.

question

Why MR is less than demand

answer

To sell more units, the monopoly must lower the price on all units

question

economies of scale

answer

factors that cause a producer's average cost per unit to fall as output rises

question

Profit Maximizing Rule

answer

MR=MC

question

effects of price ceilings

answer

Creates a shortage.

question

Production Possibility Curve (PPC)

answer

illustrates the trade-offs facing an economy that produces only two goods.

question

allocative efficiency

answer

P = MC

question

effects of price floors

answer

Creates a surplus

question

allocative efficiency

answer

A state of the economy in which production is in accordance with consumer preferences

question

subsidy

answer

A government payment that supports a business or market - shifts supply (MC) to the right

question

absolute advantage

answer

the ability of an individual, a firm, or a country to produce more of a good or service than competitors, using the same amount of resources

question

productive efficiency

answer

P = min ATC

question

deadweight loss

answer

The lost associated with transactions that don't occur.

question

comparative advantage

answer

the ability to produce a good at a lower opportunity cost than another producer

question

tax

answer

a required payment to the government - shifts supply (MC) to the left

question

Short run profit to long-run

answer

The market supply curve shifts to the right as more firms enter

question

PPC: inefficient point

answer

operating inside the PPC

question

consumer surplus

answer

the amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it

question

Short run loss to long-run

answer

The market supply curves shifts to the left as firms exit

question

Monopolistic competition in the long run

answer

Firms will break-even

question

game theory

answer

the study of how people behave in strategic situations

question

MRDARP

answer

Marginal Revenue = Demand = Average Revenue = Price

question

producer surplus

answer

the amount a seller is paid for a good minus the seller's cost of providing it

question

PPC: unattainable point

answer

operating outside the PPC

question

dominant strategy

answer

a strategy that is best for a player in a game regardless of the strategies chosen by the other players

question

shut down rule

answer

P<AVC

question

law of diminishing marginal utility

answer

rule stating that the additional satisfaction a consumer gets from purchasing one more unit of a product will lessen with each additional unit purchased

question

PPC shifters

answer

-Change in quantity or quality of resources
-Change in technology

question

supply

answer

the amount of goods producers are willing and able and sell

question

Total Revenue

answer

Price * Quantity

question

Human capital

answer

the knowledge and skills a worker gains through education and experience

question

demand

answer

the amount of goods consumers are willing and able to buy

question

Profit

answer

TR-TC

question

price-discriminating monopoly

answer

D will equal MR and no CS will exist

question

Cartel

answer

colluding oligopoly

question

First stage of returns

answer

TP is increasing at an increasing rate and MP is increasing

question

import quota

answer

a limit on the amount of a good that can be imported

question

Tariff

answer

A tax on imported goods

question

Monopolistic Competition Short-run profit to the long-run

answer

More firms enter and demand will shift to the left as more substitutes exist

question

Second state of returns

answer

TP is increasing at a decreasing rate and MP is decreasing

question

Monopolistic Competition Short-run loss to the long-run

answer

Firms exit and demand will shift to the right as less substitutes exist

question

Third stage of returns

answer

TP is decreasing and MP is negative

question

excise tax

answer

a tax on the production or sale of a good

question

amount imported

answer

Difference between the quantity that consumers are willing and able to buy and the amount produced domestically

question

CS gets smaller

answer

When a tariff is added on imports

question

Total revenue

answer

Price x Quantity

question

Total Tax Revenue

answer

Tax x Q

question

Total Revenue the seller gets after tax

answer

Total Revenue - Total Tax Revenue

question

Tax per unit

answer

vertical distance between supply curves

1 of 131

question

Economics

answer

how an individual in society experiences limitless wants, and chooses to allocate its limited resources to satisfy wants

question

ATC

answer

total cost divided by the quantity of output

question

Monopoly

answer

A market structure which has one firm

question

shifters of the supply curve

answer

Technology, input prices, related prices, expectations, sellers.

question

productive efficiency

answer

the production of any particular good in the least costly way

question

normal goods

answer

Demand for them increases as income increases.

question

AVC

answer

TVC/Q

question

monopolistic competition

answer

a market structure in which many companies sell products that are similar but not identical

question

AFC

answer

ATC-AVC

question

Oligopoly

answer

A market structure in which a few large firms dominate a market

question

inferior goods

answer

Demand for them decreases as income increases.

question

Opportunity Cost

answer

what one sacrifices in order to obtain what one wants

question

Marginal

answer

Extra or additional

question

substitutes

answer

As price of a good X increases, demand for product Y increases.

question

marginal cost

answer

Extra cost of producing one additional unit of production.

question

perfect competition

answer

a market structure in which a large number of firms all produce the same product

question

Market Economy

answer

Decisions of individual producers and consumers largely determine what, how, and for whom to produce, with little government involvement in decisions

question

complements

answer

As price of good X increases, demand for good Y decreases.

question

Shape of AFC curve

answer

Continuously decreases as more units of output are produced

question

deadweight loss

answer

the total loss of producer and consumer surplus from underproduction or overproduction

question

Shape of MC curve

answer

Decreases and then increases due to Diminishing Marginal Returns

question

productive efficiency

answer

P = minimum ATC

question

change in demand/supply

answer

Shift of curve

question

Shape of ATC and AVC

answer

U-shaped and the minimum goes through MC

question

change in quantity demanded/supplied

answer

Movement along curve

question

Profit Maximizing Rule

answer

MR=MC

question

Command Economic System

answer

Government decides what goods/services are needed

question

Total Revenue Maximization

answer

When MR = 0

question

short run

answer

the period of time during which at least one of a firm's inputs is fixed

question

answer

ATC * Q

question

socially optimal price (allocative efficiency)

answer

P = MC

question

economies of scale

answer

a producer's long-run average total cost falls as output rises

question

Mixed Economic System

answer

Producers, consumers, and government answers economic questions

question

fair-return price

answer

P = ATC

question

Scarcity

answer

Limited amount of a desired resource

question

monopoly unregulated price

answer

Go to MR=MC and then up to the Demand curve to find the price

question

diseconomies of scale

answer

a producer's long-run average total cost increases as output rises

question

market size

answer

Number of consumers. As number of consumers increases, so does demand.

question

expectations (demand)

answer

Presumptions made by consumers. If people expect a price to rise, demand increases. If they expect a price to fall, demand decreases.

question

constant returns to scale

answer

long-run average total cost stays the same as the quantity of output changes

question

Barriers to entry in a monopoly market

answer

ownership of a key resource or patent

question

marginal revenue

answer

the additional revenue from selling one more unit of output

question

Land

answer

Anything that comes from the earth

question

tastes and preferences

answer

As preferences for a product grow, so does demand.

question

long run

answer

the time period in which all resources are variable

question

Law of Diminishing Marginal Returns

answer

As more of a variable resource is added to a given amount of a fixed resource, marginal product eventually declines

question

Labor

answer

Payment for salary and wages

question

law of demand

answer

As price increases, quantity decreases.

question

Total Revenue

answer

Price * Quantity

question

variable costs

answer

costs that vary directly with the level of production

question

law of supply

answer

As price increases, quantity increases.

question

Phyiscal capital

answer

Goods that produce other goods for future use

question

Total Cost

answer

ATC * Q

question

Entrepreneurship

answer

Person who takes on risk to start a business

question

fixed costs

answer

costs that remain constant as output changes

question

Increase in fixed costs

answer

shifts AFC and ATC upward

question

Profit

answer

P > ATC

question

technology

answer

New, more efficient technology increases supply.

question

Decrease in fixed costs

answer

shifts AFC and ATC downward

question

Normal Profit

answer

An economic profit of zero

question

Increase in variable costs

answer

shifts AVC, ATC, and MC upward

question

Elastic range of demand curve

answer

MR is positive

question

equilibrium

answer

When quantity supplied = quantity demanded.

question

Decrease in variable costs

answer

shifts AVC, ATC, and MC downward

question

Inelastic range of demand curve

answer

MR is negative

question

Microeconomics

answer

Study of how individuals make decisions and how those decisions interact

question

TR Test : Inelastic demand

answer

Price decreases and TR decreases

question

TVC

answer

AVC * Q

question

TR Test: Elastic Demand

answer

Price decreases and TR increases

question

TFC

answer

AFC * Q

question

Macroeconomics

answer

Concerned with overall ups and downs in the economy

question

shortage

answer

Quantity demanded is greater than quantity supplied.

question

consumer surplus

answer

the amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it

question

perfect competition

answer

a market structure in which a large number of firms all produce the same product

question

surplus

answer

Quantity supplied is greater than quantity demanded

question

producer surplus

answer

the amount a seller is paid for a good minus the seller's cost of providing it

question

Perfect Competition in the Long Run

answer

normal profit

question

price controls

answer

Legal restrictions on how high or low a market price can go. Price ceilings and floors.

question

price ceilings

answer

A maximum price that sellers are allowed to charge. Only efficient if it's below equilibrium.

question

Perfect Competition Demand Curve

answer

perfectly elastic

question

marginal revenue

answer

equals the market price in perfect competition

question

Trade-off

answer

All the things given up to get what you want

question

price floors

answer

A minimum price buyers are allowed to pay for a good or service. Only efficient if it's above equilibrium.

question

Why MR is less than demand

answer

To sell more units, the monopoly must lower the price on all units

question

economies of scale

answer

factors that cause a producer's average cost per unit to fall as output rises

question

Profit Maximizing Rule

answer

MR=MC

question

effects of price ceilings

answer

Creates a shortage.

question

Production Possibility Curve (PPC)

answer

illustrates the trade-offs facing an economy that produces only two goods.

question

allocative efficiency

answer

P = MC

question

effects of price floors

answer

Creates a surplus

question

allocative efficiency

answer

A state of the economy in which production is in accordance with consumer preferences

question

subsidy

answer

A government payment that supports a business or market - shifts supply (MC) to the right

question

absolute advantage

answer

the ability of an individual, a firm, or a country to produce more of a good or service than competitors, using the same amount of resources

question

productive efficiency

answer

P = min ATC

question

deadweight loss

answer

The lost associated with transactions that don't occur.

question

comparative advantage

answer

the ability to produce a good at a lower opportunity cost than another producer

question

tax

answer

a required payment to the government - shifts supply (MC) to the left

question

Short run profit to long-run

answer

The market supply curve shifts to the right as more firms enter

question

PPC: inefficient point

answer

operating inside the PPC

question

consumer surplus

answer

the amount a buyer is willing to pay for a good minus the amount the buyer actually pays for it

question

Short run loss to long-run

answer

The market supply curves shifts to the left as firms exit

question

Monopolistic competition in the long run

answer

Firms will break-even

question

game theory

answer

the study of how people behave in strategic situations

question

MRDARP

answer

Marginal Revenue = Demand = Average Revenue = Price

question

producer surplus

answer

the amount a seller is paid for a good minus the seller's cost of providing it

question

PPC: unattainable point

answer

operating outside the PPC

question

dominant strategy

answer

a strategy that is best for a player in a game regardless of the strategies chosen by the other players

question

shut down rule

answer

P<AVC

question

law of diminishing marginal utility

answer

rule stating that the additional satisfaction a consumer gets from purchasing one more unit of a product will lessen with each additional unit purchased

question

PPC shifters

answer

-Change in quantity or quality of resources
-Change in technology

question

supply

answer

the amount of goods producers are willing and able and sell

question

Total Revenue

answer

Price * Quantity

question

Human capital

answer

the knowledge and skills a worker gains through education and experience

question

demand

answer

the amount of goods consumers are willing and able to buy

question

Profit

answer

TR-TC

question

price-discriminating monopoly

answer

D will equal MR and no CS will exist

question

Cartel

answer

colluding oligopoly

question

First stage of returns

answer

TP is increasing at an increasing rate and MP is increasing

question

import quota

answer

a limit on the amount of a good that can be imported

question

Tariff

answer

A tax on imported goods

question

Monopolistic Competition Short-run profit to the long-run

answer

More firms enter and demand will shift to the left as more substitutes exist

question

Second state of returns

answer

TP is increasing at a decreasing rate and MP is decreasing

question

Monopolistic Competition Short-run loss to the long-run

answer

Firms exit and demand will shift to the right as less substitutes exist

question

Third stage of returns

answer

TP is decreasing and MP is negative

question

excise tax

answer

a tax on the production or sale of a good

question

amount imported

answer

Difference between the quantity that consumers are willing and able to buy and the amount produced domestically

question

CS gets smaller

answer

When a tariff is added on imports

question

Total revenue

answer

Price x Quantity

question

Total Tax Revenue

answer

Tax x Q

question

Total Revenue the seller gets after tax

answer

Total Revenue - Total Tax Revenue

question

Tax per unit

answer

vertical distance between supply curves

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