APM_Unit 1 Review Quiz

What happens if there is an increase in both demand and supply?

• Price increases but quantity decreases
• Price decreases but quantity increases
• Price change is indeterminate; quantity increases
• Both price and quantity increase

Answer explanation

When both demand and supply increase, quantity rises while price depends on the magnitude of the shifts.

A decrease in supply with no change in demand will:

• Decrease equilibrium price and quantity
• Increase equilibrium price and decrease equilibrium quantity
• Leave equilibrium unchanged
• None of the above

Answer explanation

A decrease in supply raises equilibrium price and lowers equilibrium quantity.

Specialization in an economy generally leads to:

• Lower opportunity costs
• Decreased productivity
• Less efficient resource use
• Reduced trade benefits

Answer explanation

Specialization helps reduce opportunity costs and enhances productivity.

What is allocative efficiency?

• Producing goods at the lowest cost
• Producing the mix of goods desired by society
• Maximizing production of one good
• Minimizing production time

Answer explanation

Allocative efficiency occurs when resources are used to produce what society values most.

A mixed economy combines elements of:

• Command and market economies
• Traditional and subsistence economies
• Market economies only
• Command economies only

Answer explanation

A mixed economy features both market-driven forces and government intervention.

Capital goods differ from consumer goods in that:

• Capital goods are for immediate consumption
• Consumer goods increase future productivity
• Capital goods are used in producing other goods
• Consumer goods cannot be traded

Answer explanation

Capital goods aid in production processes, unlike consumer goods for direct use.

Which of the following is a characteristic of a command economy?

• Private ownership of resources
• Decisions made by government planners
• Competitive markets
• Decentralized pricing

Answer explanation

Command economies rely on centralized decisions by the government.

Factors of production include:

• Land, labor, capital, entrepreneurship
• Money, markets, production, exchange
• Government, firms, households, banks
• None of the above

Answer explanation

Land, labor, capital, and entrepreneurship are the essential inputs for production.

Human capital refers to:

• Physical assets owned by firms
• Skills and knowledge of the labor force
• Population size
• Monetary savings

Answer explanation

Human capital includes the expertise and skills that enhance worker productivity.

Entrepreneurship involves:

• Risk-taking and innovation
• Increased government regulation
• Natural resource allocation
• Population growth

Answer explanation

Entrepreneurs innovate and take risks to drive economic progress.