Unit 1 AP MicroEconomics

In a market economy, most choices about production and consumption are made by which of the following?

• politicians

• many individuals and firms

• the government

• managers

• economists

Which of the following pairs indicates a category of resources and an example of that resource?

• money ; investment

• capital ; money

• capital ; minerals

• land ; factory

• land ; timber

Which of the following situations is explained by increasing opportunity costs?

• more people go to college when the job market is good

• more people do their own home repairs when hourly wages fall

• there are more parks in crowded cities than in suburban areas

• convenience stores cater to busy people

• people with higher wages are more likely to mow their own lawn

If there is no specialization of resources in the production of milk and cream, the production possibilities curve for an economy that produces these two goods is

• bowed out and downward-sloping

• straight and downward-sloping

• bowed in and downward-sloping

• horizontal

• vertical

The study of the costs and benefits of doing a little bit more of an activity instead of a little bit less is called

• economics

• microeconomics

• macroeconomics

• marginal analysis

• market analysis

The fundamental problem with command economies is a lack of

• central authority

• workers

• incentives

• land

• opportunity cost

Which of the following is true about the ceteris paribus assumption?

• It makes the use of more complicated but more rewarding models

• It means "maximize profit at all costs"

• It simplifies the study of how a single change affects an economy

• It means "the customer is always right"

• It means "people behave rationally"

If Country A has an absolute advantage in making butter and is considering trade with Country B, we know that

• Country A also has a comparative advantage in making butter

• Country B has a comparative advantage in making butter

• Country A can make more butter than Country B can with a given amount of input

• if the two countries trade, Country A should specialize in making butter

• if the two countries trade, Country B should specialize in making butter

Suppose that in a day Nigel can make three placemats or one gallon of maple syrup, and Pauline can make two placemats or two gallons of maple syrup. Which of the following terms of trade would be mutually beneficial for Nigel and Pauline?

• Nigel trades one placemat for 1/2 gallon of maple syrup from Pauline

• Pauline trades one placemat for 1/2 gallon of maple syrup from Nigel

• Nigel trades one placemat for two gallons of maple syrup from Pauline

• Pauline trades one placemat for two gallons of maple syrup from Nigel

• Nigel trades one placemat for 1/4 gallon of maple syrup from Pauline

Comparative advantage explains which of the following?

• a country's ability to produce more of a particular good or service

• when production is considered efficient

• why the production possibilities curve is bowed outward

• the source of gains from trade

• why the production possibilities curve shifts outward