AP Microeconomics Unit Review

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26 Terms

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Negative externality
________: when someone uses a product, it decreases the benefit of others (ex.
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Substitution effect
________: as the price of a good increases, consumers substitute the good with another that is cheaper.
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Lorenz curve
________: measures the distribution of income equality (you want to be as close of possible to the perfect equality line as possible)
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Positive externality
________: when one uses a product, others benefit (ex.
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Quota
________: upper limit of a quantity that can be bought or sold (known as quantity control)
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License
________: gives an owner th__e right to supply a good /service__.
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Deadweight loss
________ (DWL): transactions that should occur, but dont because of government intervention (calculate the area= triangle formula, ½ (base x height)
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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)
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Regressive
________: taxes are lower % on people earning a higher income (increases income inequality)
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Progressive
________: taxes are higher % on people earning a higher income (reduces income inequality)
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Nash equilibrium
________: point where both players can do no better than the other given the choice of their opponent.
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Double shift
________: either price or quantity will be unknown.
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Constant returns
________ to scale: output increase directly in proportion to an increase in all inputs (ex.
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Firms
________ can make profit or losses.
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Microeconomics
________: individuals /households /firms making decisions and how those decisions interact (ex: college vs. a job)
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Cartels
________: a group that agrees to control the price and output of a product (often form in oligopoly)
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Natural monopoly
________: has large fixed costs, and long economies of scale, has downward sloping ATC curve.
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Public goods
________: underproduced due to freeloader problem.
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Long run
________: time period in which all inputs can be variable.
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Macroeconomics
________: behavior of the economy as a whole (ex: employment)
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amount of output
Fixed cost: cost that doesnt change with ________ produced (ex.
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Short run
________ can have either profit or loss.
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Tariffs
________: tax placed on a good that is imported or exported.
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Opportunity cost
________: value of the next- best alternative that you give up to make another choice.
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Complements
________: goods /services that are __consumed togethe__r (ex.
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price regulation
Non ________: works like taxes, they ensure competition /environmental protection /health and safety.