AP Micro Unit 1

• Estonia has a comparative advantage in producing lumber.

• Finland has a comparative advantage in producing cell phones.

• Finland has an absolute advantage in producing lumber.

• Estonia has both the absolute and comparative advantages in producing lumber.

• 
  Neither country has a comparative advantage in producing cell phones.

A farmer in Country A can harvest 20 bushels of wheat or 10 bushels of corn in a day, while a farmer in Country B can harvest 8 bushels of wheat or 8 bushels of corn in a day. If Country A and Country B specialize and trade, Country A will

• 
  export wheat and import corn

• export corn and import wheat

• export both wheat and corn

• import both wheat and corn

• benefit more from trade than will Country B

Stefan and Donna produce orange juice and canvases. The table provided shows the maximum possible production of orange juice OR canvases that can be produced by Stefan and Donna. Which of the following terms of trade would be mutually beneficial to Stefan and Donna?

• 1 canvas for 0.4 liter of orange juice

• 1 canvas for 0.5 liter of orange juice

• 1 canvas for 1 liter of orange juice

• 1 canvas for 1.5 liters of orange juice

• 1 canvas for 2.5 liters of orange juice

A country can consume beyond its present production possibilities curve when it

• trades with other countries, thus taking advantages of different opportunity costs

• reduces unemployment, thus increasing output

• experiences decreasing opportunity costs.

• faces an upward-sloping production possibilities curve

• faces a downward-sloping production possibilities curve

All of the following are included in computing the opportunity cost of attending college EXCEPT

• interest paid on student loans

• wages the student gave up to attend college

• money spent on college tuition

• money spent on clothing expenses

• money spent on books and supplies

An opportunity cost is entailed in which of the following situations?

1. I. A student decides to attend college full-time.

2. II. A family uses its $20,000 savings to purchase an automobile.

3. III. A farmer decides to grow more wheat and less corn.

• I only

• II only

• III only

• I and III only

• I, II, and III

The table provided shows the total benefits and costs of studying at the library. If the student is rational, the optimal number of hours to spend at the library is

• 2

• 3

• 4

• 5

• 6

The opportunity cost of owning a business is equal to which of the following?

1. I. The economic profits earned in the business

2. II. The accounting profits earned in the business

3. III. The profits that could be earned in another business using the same amount of resources

• I only

• II only

• III only

• I and III only

• I, II, and III

Mr. Carpenter devotes his working time to producing tables and chairs. An increase in the demand for chairs will result in

• an increase in the amount of time he devotes to producing tables

• an increase in his opportunity cost of producing tables

• a decrease in the price of lumber

• a decrease in the price of chairs

• a decrease in his total revenue

Opportunity cost is defined as

• excess demand for a good

• unlimited resources and unlimited wants

• a comparative advantage in the production of a good

• the value of the next best alternative that is forgone when an activity is pursued

• 
  the value of all other possible alternatives that are forgone when an activity is pursued