AP Micro – Study Guide Mock Exam – MCQ’s

What happens to the demand curve when consumer income increases for a normal good?

• A) Shifts left

• B) Shifts right

• C) No change

• D) Becomes vertical

• E) Becomes horizontal

If the price of a substitute good increases, what is the expected effect on the original good?

• A) Demand decreases

• B) Demand increases

• C) Supply decreases

• D) Price decreases

• E) No effect

Opportunity cost refers to:

• The total financial cost of a choice

• The next best alternative forgone

• The actual money spent on a decision

• The revenue generated from an investment

• The cost of all possible choices

A production possibilities curve (PPC) is bowed outward because:

• A) Resources are perfectly adaptable

• B) There is increasing opportunity cost

• C) Demand is always fluctuating

• D) The economy is operating at full employment

• E) Productivity is always increasing

If an economy is producing inside its production possibilities curve, it means:

• A) It is efficiently using all resources

• B) There is unemployment or inefficiency

• C) More capital goods must be produced

• D) Consumer spending has increased

• E) It has reached full potential output

What would cause the PPC to shift outward?

• A) A reduction in available labor

• B) A decrease in productivity

• C) Technological advancements

• D) A decline in natural resources

• E) Increased inflation

Comparative advantage occurs when a country:

• Can produce all goods more efficiently than another country

• Has the lowest opportunity cost in producing a good

• Produces the most output in absolute terms

• Faces decreasing marginal returns

• Can produce all goods at a lower cost

If a nation specializes according to its comparative advantage, what happens?

• Total world production increases

• The nation becomes self-sufficient

• The nation produces all goods it consumes

• Total efficiency decreases

• Trade becomes unnecessary

What happens if a country imposes a tariff on imports?

• Domestic prices decrease

• Domestic producers benefit, but consumers face higher prices

• Foreign producers benefit more

• Trade increases

• There is no effect on domestic production

A price floor set above equilibrium will:

• Cause a shortage

• Have no effect

• Cause a surplus

• Decrease price

• Lead to equilibrium