AP Microeconomics Unit 1.1 - 1.3 CFA#1

Scarcity is best defined as

• the difference between limited wants and limited economic resources.

• the difference between the total benefit of an action and the total cost of that action.

• the difference between unlimited wants and limited economic resources.

• the opportunity cost of pursuing a given course of action.

• the difference between the marginal benefit and marginal cost of an action.

Which of the following statements describes an economy confronting scarcity?

• If more of one good is produced, less of another good must be produced.

• An economy can produce a limitless amount of all goods.

• All individuals are able to satisfy their consumption desires.

• Scarcity is eliminated by government provision of goods.

• Scarcity only exists as a problem when there is more than one good to produce.

Assume an economy is using all its available resources efficiently to produce only two goods, X and Y. As more of good X is produced, what happens to the production of good Y?

• The production of good Y also increases.

• More resources will need to be devoted to producing good Y.

• Less of good Y is produced as resources move from producing good Y to producing good X.

• The economy can only produce more of good X if there is more labor available.

• There will be no loss of good Y produced.

As a factor of production, capital refers to the

• money available to start a business

• stocks and bonds issued by businesses to raise funds

• financial investment of businesses

• currency in circulation and deposits in financial institutions

• tools and machinery used to produce goods and services

In contrast to a market economy, a command economy relies on which of the following?

• The private sector in deciding what goods will be produced

• Private ownership of resources

• Profits as incentives to make choices

• Supply and demand to determine prices

• The government to allocate resources

A linear production possibilities curve indicates which of the following?

• Constant opportunity costs

• Decreasing opportunity costs

• Increasing opportunity costs

• Diminishing marginal returns

• Labor-intensive production

According to the graph above, if a country is currently producing at point X, the opportunity cost of producing another consumer good is

• 20 capital goods

• more than 20 capital goods

• fewer than 20 capital goods

• 20 consumer goods

• fewer than 20 consumer goods

Which of the following best defines opportunity cost?

• the cost of producing those goods most desired by a given economy

• cost of the input mix that will lead to the greatest rate of growth for a given company

• amount of one product that must be given up in order to produce another additional unit of another product

• use of the least-cost method of production

• the cost of labor used in the production process