AP Macro Unit 1 Review

Which of the following is an example of a factor of production?

• A want
• A bank
• Stock
• Capital

Which of the following describes scarcity?

• Wants are limited.
• Resources are unlimited.
• Wants exceed resources.
• Resources are fully employed.

All societies face a trade-off for every decision for which of the following reasons?

• A decision entails zero opportunity cost.
• Resources are scarce.
• Some resources are always unemployed.
• Resources are not allocated efficiently.

Any point inside a production possibilities curve is

• better than points on the production possibilities curve
• allocatively efficient but technologically inefficient
• associated with inefficient use or unemployment of some resources
• associated with movements along the production possibilities curve

When an economy operates inside its production possibilities curve, it can increase production of one good

• at zero opportunity cost in terms of the other good
• only with an increase in unemployment
• only with an increase in the price level
• only with an increase in technology

A production possibilities curve that is concave to the origin (bowed out) implies that as more of a good is produced, the opportunity cost

• remains constant
• decreases
• decreases at first and then increases
• increases

All of the following concepts can be illustrated using the production possibilities curve model EXCEPT

• unemployment
• opportunity cost
• inflation
• choice

Which of the following is always true of an economy operating on its production possibilities frontier?

• Its resources are fully employed.
• It is allocatively efficient.
• It cannot trade with other nations because it is the most efficient producer of tradeable goods.
• It will necessarily operate on the same frontier the following year.

Which statement best describes the law of demand?

• When price increases, demand decreases.
• When price increases, demand increases.
• Price and quantity demanded are inversely related.
• Price and quantity demanded are directly related.

Which of the following will cause a movement along the demand curve for chicken, a normal good, resulting in an increase in the quantity demanded?

• An increase in consumers' income
• An increase in the price of fish, a substitute good
• An increase in the price of barbecue sauce, a complementary good
• A decrease in the price of chicken