AP microeconmics

Midterm Study Guide

A perfectly competitive market firm will maximize profit at the quantity at which the firm’s marginal revenue equals

Marginal Cost

Which of the following is definitely NOT true regarding economic profit?

Economic profit excludes implicit costs

The best example of a natural monopoly is

the natural gas/electric company in your state

Perfect price discrimination will result in

more output and less consumer surplus

A firm is considered profitable if

ATC < P

Homogenous products are

Uniform or standardized

A perfectly competitive market is a price taker because

intense competition prevents it from influencing the price

A firm should continue to produce in the SR as long as the price is at least equal to the

Minimum AVC

Economic Theory assumes that the goal of firms is to maximize

profit

Which of the following characteristics is necessary in order for a firm to price discriminate?

some control over price

Perfectly competitive firms have no individual control over the

price of the product

Because a perfectly competitive firm is a price-taker, its short run demand curve is

perfectly elastic

Wool caps and wool scarves are substitutes in production, If an increase in the demand for caps raises the price of caps,

The supply curve for scarves will shift to the right

Which of the following statements is normative?

Cars can run on gasoline, electricity, or diesel fuel

Which of the following is an example of capital?

a factory

The income effects of a change in the price of a good are more important for goods that:

are normal

In a market economy, most choices about production and consumption are made by which of the following?

Many individuals and firms

which of the following questions is studied in microeconomics?

Should I go to college or get a job after I graduate?

Which of the following is true about the concept of Ceteris Paribus?

If simplifies the study of how a single change affects an economy

Which of the following exist in a command economy but not in a market economy?

a central authority making production and consumption decisions

All opportunity costs are

values of alternatives that must be given up

The study of the costs and benefits of doing a little bit more of an activity instead of a little bit less is called

marginal analysis

The production possibilities curve will certainly be straight if

the economy experience decreasing opportunity costs for both goods

a decrease in price of butter would most likely decrease the demand for

margarine

which of the following will increase demand for disposable diapers?

a new “baby boom”

If goods A and Z are complements, an increase in the price of good Z will

decrease the demand for good A

A technological advance in textbook production will lead to which of the following?

an increase in textbook supply

Expectations among hiking-boot makers that boot prices will rise significantly in the future will lead to which of the following NOW?

a decrease in boot supply