AP Macro Final Boss Review

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

• A want

• A bank

• A bond

• Capital

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 will necessarily operate on the same frontier the following year.

• It must be a command economy.

If a certain combination of goods or services lies outside the production possibilities curve of an economy, which of the following is true?

• Effective trade barriers have reduced foreign imports into the economy.

• New technology is being used in production.

• Resources are not available to achieve that combination of goods or services.

• Resources are being used at a more rapid rate than they were in the past.

Which of the following would shift a country’s production possibilities curve inward?

• A reduction in the country’s inflation rate

• A reduction in the country’s real interest rate

• A reduction in the size of the country’s labor force

• An increase in the country’s cyclical unemployment rate

Suppose two countries are each capable of individually producing two given commodities. Instead, each specializes by producing the commodity for which it has a comparative advantage and then trades with the other country. Which of the following is most likely to result?

• The two countries will become more independent of each other.

• Unemployment will increase in one country and decrease in the other

• Both countries will become better off.

• There will be more efficient production in one country but less efficient production in the other.

The main benefit of free trade between two countries is that

• income distribution in each country will become more equitable

• migration from one country to the other will increase

• each country can consume beyond its constraints of resources and productivity

• each country will become more self-sufficient

Mary Jane is a lawyer who can earn $150 per hour in her law practice. She is also an excellent carpenter who can build cabinets three times as fast as the best carpenter, whose hourly wage is $20 per hour. Which of the following is a correct economic statement?

• Mary Jane has a comparative advantage in law so she should specialize in law and hire a carpenter to make her cabinets.

• Mary Jane is three times faster than any carpenter so she should give up her law practice to become a carpenter.

• When carpenters work for lawyers, they should charge $150 per hour instead of $20 per hour.

• Because Mary Jane is an excellent carpenter, when the best carpenter works for Mary Jane, he can only charge one third as much, or $6.67 per hour.

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.

• The demand curve is always upward sloping.

Which of the following describes the law of supply?

• An increase in the price of a good will decrease the quantity demanded.

• 
  An increase in taxes will decrease the supply of a good.

• 
  An increase in the number of sellers will increase the supply of a good.

• An increase in the price of a good will increase the quantity supplied.

If the wage rate of workers producing a good decreases, then which of the following will most likely occur?

• The demand curve will shift to the right.

• 
  The supply of the good will increase.

• Demand for the good will increase

• Quantity demanded for the good will decrease.