AP Microeconomics Midterm

What is the study of economics primarily concerned with?

• How to eliminate scarcity in society

• How to allocate scarce resources to satisfy unlimited wants

• How to create unlimited resources

• How to maximize profits for businesses

What are the four categories of resources, also known as factors of production?

• Labor, education, land, entrepreneurship

• Labor, physical capital, land, entrepreneurial ability

• Labor, money, technology, natural resources

• Labor, government, technology, capital

What does scarcity refer to in economics?

• The lack of demand for goods and services

• The surplus of goods in the market

• The imbalance between limited resources and unlimited wants

• The abundance of resources in a society

What is the opportunity cost of a decision?

• The value of the next best alternative given up

• The total cost of all alternatives

• The monetary cost of the decision

• The time spent making the decision

What does the term 'marginal' refer to in economics?

• The average benefit of an action

• The overall utility of an action

• The total cost of an action

• The next unit or increment of an action

What is the law of increasing costs?

• The cost of production is unrelated to the quantity produced

• The cost of production decreases as more goods are produced

• The more of a good that is produced, the greater the opportunity cost of producing the next unit

• The cost of production remains constant regardless of output

What does a production possibility curve (PPC) illustrate?

• The elasticity of demand for a product

• The total revenue of a firm at different production levels

• The relationship between supply and demand

• The maximum quantity of one good that can be produced given the quantity of another good

What is absolute advantage?

• The ability of a producer to specialize in one good

• The ability of a producer to produce a good at a lower opportunity cost

• The ability of a producer to trade goods efficiently

• The ability of a producer to produce more of a good than others

What is comparative advantage?

• Trading goods at a higher price than competitors

• Producing a good at a lower opportunity cost than others

• Producing more of a good than others

• Specializing in the production of one good

What is allocative efficiency?

• Producing the combination of goods that provides the most net benefit to society

• Producing goods with the least amount of labor

• Producing the maximum output for a given level of resources

• Producing goods at the lowest possible cost