AP Macro Unit 1 - 1.1 - 1.4 Review

Karen works part-time at a local convenience store and earns $10 per hour. She wants to spend next Saturday afternoon attending a music concert. The full price of a concert ticket is $75 but Karen was able to get a discounted price of $50 from a friend who purchased the ticket but has become unable to attend. If Karen took 4 hours off from her job to attend the concert, what was her opportunity cost of attending the concert?

• 40

• 50

• 75

• 90

• 115

An increase in which of the following would LEAST likely increase labor productivity?

• Physical Capital

• Human Capital

• Technological improvements

• Educational Achievement

• The Labor Force

If resources were perfectly substitutable in all activities, which of the following would be true?

• Output of all goods could be increased at zero opportunity cost

• The PPC would be a straight line

• Specialization and mutually beneficial trade would be impossible

• No country or individual would have a comparative advantage in any activity

• Scarcity of resources would be eliminated

The diagram above shows the PPC for an economy that produces only consumption and capital goods. All of the following statements about this are true EXCEPT:

• Producing at point Z results in the underutilizing of resources

• The combination represented by point Y is unattainable, given the scarcity of resources

• Resources are fully utilized at points W and X

• Producing at point X will result in greater economic growth than will producing at point W

The diagram above shows the PPC for Country Y. Which of the following statements is true?

• If country Y is producing at point C, it is using all its resources efficiently

• The opportunity cost of producing more machines is constant

• Producing at point C is the most preferable because butter is a nondurable good

• Country Y can’t produce at point E

• The economy is not producing at its potential since it is not producing at point D

Before specialization and trade the domestic opportunity cost of producing one ton of grain in Alpha and in Beta is which of the following?

• Alpha = 1 Ton of Steel and Beta = 1 Ton of Steel

• Alpha = 1 Ton of Steel and Beta = 2 Tons of Steel

• Alpha = 2 Tons of Steel and Beta = 1 Ton of Steel

• Alpha = 1 Ton of Steel and Beta = 0.5 Ton of Steel

• Alpha = 0.33 Ton of Steel and Beta = 1.5 Tons of Steel

The theory of comparative advantage implies that Alpha would find is advantageous to

• Export grain and import steel

• Export steel and import grain

• Export both grain and steel and import nothing

• Import both grain and steel and export nothing

• Trade 1 ton of grain for 0.5 ton of steel

At what real exchange ratio, also referred to as the terms of trade, between grain(G) and steel(S) would both Alpha and Beta find it mutually advantageous to specialize and trade?

• 1G = 3.0S

• 1G = 1.5S

• 1G = 1.0S

• 1G = 0.5S

• There is no real exchange ratio that would enable both countries to to benefit, since Alpha has an absolute advantage in both goods.

The table shows the production alternatives for Country A and Country B for producing computers and cars with equal amounts of resources that are fully and efficiently employed.

Which of the following is true according to the data in the table?

• Country A has an absolute and comparative advantage in the production of computers

• Country B has an absolute advantage and comparative advantage in the production of computers

• Country B should import computers and export cars

• Since Country B has an absolute advantage in the production of both goods, it will not trade with Country A

• Neither country can benefit from trade

If two nations specialize according to the law of comparative advantage and then trade with each other, which of the following would be true?

• A smaller number of goods would be available in each trading nation

• Total world production of goods would decrease

• Everyone within each nation would be better off

• Each nation would increase its consumption possibilities

• One nation would gain at the expense of another nation