AP Micro - Unit 1

The crucial problem of economics is

• Establishing a fair tax system.

• Providing social goods and services

• Developing a price mechanism that reflects the relative scarcities of products and resources.

• Allocating scarce productive resources to satisfy wants

• Enacting a set of laws that protects resources from overuse.

When one decision is made, the next best alternative not selected is called

• economic resources

• opportunity cost

• scarcity

• comparative disadvantage

• production

Which of the following is true of the concept of increasing opportunity costs?

• It is unimportant in command economies because of central planning.

• It suggests that the use of resources to produce a set of goods and services means that as more of one is produced, some of the other must be sacrificed.

• It is irrelevant if the production possibilities curve is convex to the origin

• It suggests that unlimited wants can be fulfilled.

• It means that resources are plentiful and opportunities to produce greater amounts of goods and services are unlimited.

In the circular flow diagram, which of the following is true?

• Businesses pay wages, rent, interest, and profits to households in return for use of factors of production.

• Businesses purchase goods and services from households in return for money payments.

• Households pay wages, rent, interest, and profits to businesses in return for use of factors of production.

• The relationship between households and businesses exist only in a traditional society.

• The relationship between households and businesses exists only in command economy.

Which of the following goods would be considered scarce?

I. Education

II. Gold

III. Time

• I only

• II only

• III only

• I and II only

• I, II and III

In which way does a straight-line production possibilities curve differ from a concave production possibilities curve?

• A straight-line production possibilities curve has a decreasing opportunity cost.

• A straight-line production possibilities curve has a constant opportunity cost.

• A straight-line production possibilities curve has an increasing opportunity cost.

• A straight-line production possibilities curve does not show opportunity cost

• Upward-sloping production possibilities curve.

The law of increasing opportunity cost is reflected in the shape of the

• Production possibilities curve concave to the origin (“bowed-out”)

• Production possibilities curve convex to the origin (“bowed-in”)

• Horizontal production possibilities curve

• Straight-line production possibilities curve

• Upward-sloping production possibilities curve

Which of the following would cause an inward shift of the production possibilities curve?

• An increase in unemployment

• An increase in inflation

• An increase in capital equipment

• A decrease in consumer demand

• A decrease in the population

Which of the following would cause an outward shift in the production possibilities curve?

• An increase in unemployment

• An increase in inflation

• An increase in capital equipment

• A decrease in natural resources

• A decrease in the number of workers

What is the opportunity cost of moving from point B to C on the curve?

• 30 tons of wheat

• 30 tons of steel

• 5 tons of wheat

• 5 tons of steel

• 75 tons of wheat