AP Macro Review

Unit 1Basic Economic Concepts

1. Ronald wants to buy an Xbox. According to the laws of economics, Ronald will buy the Xbox if:

a) The opportunity cost is less than the purchase costs

b) The marginal benefit is greater than the marginal cost

c) The marginal cost is greater than the marginal benefit

d) The marginal benefit is equal to the marginal cost

e) None of the above

2. A country is said to have comparative advantage over another country when:a) It can produce a good at a lower opportunity cost than

another countryb) It can produce a good utilizing fewer resources per unit of

output than another countryc) There is a higher degree of specialization and division of labor

compared to another countryd) When comparing each country’s production possibilities

frontiers, one country is operating at maximum efficiency output

e) One country’s production possibilities frontier is shifted farther to the right compared to another country’s production possibilities frontier

3. Any point along the production possibilities curve is:

a) Attainable and efficientb) Attainable yet inefficientc) Unattainable and inefficientd) Showing that resources are not being utilized

to their full potentiale) None of the above

4. Economic growth refers to:

a) A rightward shift of the production possibilities curve

b) Movement along the demand curvec) Movement along the supply curved) The point where the supply and demand

curves intersecte) The allocation of private property into public

sectors

5. The production possibilities curve is concave because:

a) As production of goods and services increases, the opportunity costs decrease

b) Taxes increase as the production of a good increases

c) As production of goods and services increases, the opportunity costs increase

d) Both B and Ce) Both A and C

6. All of the following are examples of a market economy EXCEPT:

a) Competition among sellers of productsb) Government ownership of the factors of

productionc) Freedom of sellers to enter and exit the

marketd) Unrestricted consumer choicee) The existence of markets

7. “Scarcity” is best defined as:

a) Material resources that are limitedb) An idea used by industrializing nations to satisfy

unlimited wants and desires with limited natural resources

c) Limited vital material resources compared with limited wants and needs

d) All points lying outside the production possibilities curve

e) The idea that a society’s wants and needs are unlimited, and material resources are limited

8. Mineral deposits, human capital, entrepreneurship, use of technology, and machinery are all examples of:

a) Factors of productionb) Superior and inferior goodsc) Elements sometimes needed to move an

existing company overseasd) Public goodse) Material wants and needs

9. Which of the following will cause an outward shift of the production possibilities curve?

a) Cuts in funding in educational training for employees

b) A decrease in a nation’s birthrate, thus decreasing the labor force

c) A natural disaster creating extreme limitations of a vital natural resource

d) An increase in skilled workerse) None of the above

10. How is it possible for a country to obtain more than its production possibilities curve dictates?a) Not possible without greater quantities of

the factors of production already obtainedb) Specialization and tradec) Increase in education and job trainingd) Obtainment of a greater quantity of

affordable substitutese) Increase in the division of labor

11. The production possibilities curve will show a straight line if which of the following is TRUE?

a) The opportunity cost is constantb) Vital resources for the good are limitlessc) The economy is operating below maximum

efficiency and outputd) The law of decreasing marginal utility does

not applye) Marginal benefit is less than marginal cost

12. Within the market system, prices are determined by:

a) Supply and demandb) A central planning committeec) Opportunity costd) Aggregate demande) The Federal Reserve

13. All of the following are examples of macroeconomic variables EXCEPT:

a) The price of skateboards sold in the United States between 1995 and 2005

b) The percentage change in income levels in Kenya between 1980 and 2000

c) The gross exports of goods out of the United Kingdom in 2010

d) The average price level of goods in the United States in 2011

e) The unemployment rate in Germany after World War I

Answer Key 1) B2) A3) A4) A5) C6) B7) E8) A9) D10) B11) A12) A13) A