AP Microeconomics Unit Review

Negative externality

________: when someone uses a product, it decreases the benefit of others (ex.

Substitution effect

________: as the price of a good increases, consumers substitute the good with another that is cheaper.

Lorenz curve

________: measures the distribution of income equality (you want to be as close of possible to the perfect equality line as possible)

Positive externality

________: when one uses a product, others benefit (ex.

Quota

________: upper limit of a quantity that can be bought or sold (known as quantity control)

License

______: gives an owner th__e right to supply a good /service.

Deadweight loss

________ (DWL): transactions that should occur, but dont because of government intervention (calculate the area= triangle formula, ½ (base x height)

Economic growth

________: a sustained rise in aggregate output and an increase in standard of living (causes are developments in technology, or an increase in resources)

Regressive

________: taxes are lower % on people earning a higher income (increases income inequality)

Progressive

________: taxes are higher % on people earning a higher income (reduces income inequality)

Nash equilibrium

________: point where both players can do no better than the other given the choice of their opponent.

Double shift

________: either price or quantity will be unknown.

Constant returns

________ to scale: output increase directly in proportion to an increase in all inputs (ex.

Firms

________ can make profit or losses.

Microeconomics

________: individuals /households /firms making decisions and how those decisions interact (ex: college vs. a job)

Cartels

________: a group that agrees to control the price and output of a product (often form in oligopoly)

Natural monopoly

________: has large fixed costs, and long economies of scale, has downward sloping ATC curve.

Public goods

________: underproduced due to freeloader problem.

Long run

________: time period in which all inputs can be variable.

Macroeconomics

________: behavior of the economy as a whole (ex: employment)

amount of output

Fixed cost: cost that doesnt change with ________ produced (ex.

Short run

________ can have either profit or loss.

Tariffs

________: tax placed on a good that is imported or exported.

Opportunity cost

________: value of the next- best alternative that you give up to make another choice.

Complements

________: goods /services that are __consumed togethe__r (ex.

price regulation

Non ________: works like taxes, they ensure competition /environmental protection /health and safety.