AP Macroeconomics: Unit 1 Basic Economic Concepts

Which of the following is the most fundamental issue that economics addresses?

• Choice of appropriate technology

• Reduction of unemployment

• Reduction of budget deficit

• Promotion of privatization

• Use of scarce resources

The table above shows the daily production possibilities for China and Malaysia in producing trucks and coffee using the same amount of resources. Based on the data provided, which of the following terms of trade are mutually beneficial for the two countries?

• 1 ton of coffee for 3 trucks

• 1 ton of coffee for 4 trucks

• 1 ton of coffee for 5 trucks

• 1 truck for 1 ton of coffee

• 1 truck for 5 tons of coffee

For an economy with a straight-line production possibilities curve, which of the following must be true?

I. The opportunity cost of producing other units is constant

II. Resources are completely adaptable to alternative uses

III. Resources are used efficiently

• I only

• II only

• III only

• I and II

• II and III

For the production possibilities above, the opportunity cost of moving from combination "D" to combination "C" is

• 1 hat

• 2 hats

• 10 shoes

• 15 shoes

• 3 hats

The economy of Fisherland is at full employment for which year in the above diagram?

• 2009

• 2010

• 2013

• 2015

• 2017

2015 FRQ #2: Country X and Country Y are trading partners, and both produce furnaces and solar panels. The countries can produce the following amounts using equal amounts or resources.

Country X: 6 furnaces or 8 solar panels

Country Y: 6 furnaces or 12 solar panels

(a): Which country has an absolute advantage in producing solar panels?

(b): Calculate the opportunity cost of a furnace in Country Y.

(c): Which country has the comparative advantage in producing furnaces? Explain.

(d): If the terms of trade were that 2 furnaces are exchanged for 1 solar panel, should Country X produce solar panels domestically or import solar panels from Country Y?