AP Micro - Unit 1 REVIEW

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 if the PPC is concave to the origin?

• Resources are perfectly substitutable

• It's possible to produce more of both products

• Both products are equally capable of satisfying consumer wants

• The price of the two products are the same

• As more of one good is produced, increasing amounts of the other good must be given up.

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

Ford can produce 200 Mustangs or 400 Escapes in their factory. What is the opportunity cost of making each Mustang?

• 1/2 Escape

• 1/2 Mustang

• 2 Escapes

• 2 Mustangs

• 400 Escapes

Which country has the absolute advantage in producing cars?

United States: 50 Cars and 2 Planes

Great Britain: 40 Cars and 2 Planes

• United States

• Great Britian

• Neither

• Both

• Not enough information