AP Microeconomics -Test 1

Economics is best defined as the study of...

• Why people buy products with unlimited resources

• Supply and demand

• How people satisfy unlimited wants with scarce resources

• Who receives the goods produced in an economy

• How firms maximize profits and attempt to compete with other firm

Given the production possibilities curve in the graph, which of the following represents a movement from efficiency to inefficiency?

• Point X to point W

• Point X to point Z

• Point Y to point Z

• Point W to point Z

• Point V to point Y

Question #3 is based on the following graph:
Based on a comparison of points X, Y, & Z, the opportunity cost of an additional consumer good is...

• Highest at point X

• Highest at point Y

• Highest at point Z

• Lowest at point Y

• The same at points X, Y, and Z

An example of normative economic analysis would be best exemplified by which of the following statement(s):

1.Given environmental risks, offshore drilling should be prohibited.

2.Higher education creates potential future economic growth.

3.Given budget deficits, taxes must be raised.

• 1 only

• 2 only

• 3 only

• 1 and 3 only

• 1, 2, & 3

Melissa spends $10 to buy a new dress for her baby. What is her opportunity cost for buying the dress?

• All of the alternative items she could have spent the $10 to buy

• The $10

• Only the next best alternative use of the $10

• The dress

• Melissa’s enjoyment of seeing her baby in the dress

When an economy producing two goods is operating efficiently and at full employment, increasing the production of one good will result in

• A decrease in the amount of the other good that can be produced

• An outward shift of the production possibilities curve

• An inward shift of the production possibilities curve

• An increase in the costs of both goods

• An increase in the amount of resources available

A shift of the whole Production Possibilities Curve outward (right) can be attributed to.

• Higher rates of unemployment

• Natural Disaster destroying crops

• Decreasing exports

• Increasing technology in capital goods

• Lower rates of unemployment

If tasks are assigned according to comparative advantage, which of the following is true? The table says hours!!!

• Kim should perform both tasks

• Maria should perform both tasks

• Kim should install computers and Maria should paint garage

• Kim should paint garages and Maria should install computers

• Kim and Maria should both install computers

Which country has the comparative advantage in producing units of cloth?

• Newland

• Beeland

• Neither

• Both

• Indeterminate

The graph pictured shows the production possibilities curve for Country Y. Which of the following statements is TRUE?

• If country Y is producing at point C, it is using all its resources efficiently

• The opportunity cost of producing more machines is constant

• Producing at point C is the most preferable, because butter is a nondurable good

• Country Y cannot produce at point E

• The economy is not producing at its potential, since it is not producing at point D