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AP Macro Unit 1 Review

Total questions: 75

Worksheet time: 2hrs 53mins

Name
Class
Date
1.

Which of the following is true for all economies regardless of their economic system?

a)

Every economy must determine what to produce and how it produces goods and services

b)

Every economy must find a way to distribute income equally

c)

Every economy must find ways to privatize markets to maximize efficiency

d)

Every economy must prevent unemployment through government intervention

e)

Every economy must open free trade with other economies

2.

When making a decision, the next best alternative is called

a)

The production possibilities

b)

The opportunity cost

c)

Scarcity

d)

The absolute advantage

e)

Efficiency

3.

Which of the following must be true if an individual's next best alternative to going to the beach is studying for an economics exam?

a)

They will decide to study for the exam

b)

The opp. cost is seeing their friends at the beach

c)

The person prefers playing volleyball at the beach to studying for the exam

d)

The Opp Cost of going to the beach is all the other things they could have done

e)

The Opp Cost of going to the beach is being better prepared for the exam.

4.

A point outside the PPC would represent

a)

An efficient use of resources

b)

Future output once producers become more efficient

c)

An inefficient use of resources

d)

A combination that cannot be achieved due to scarcity

e)

Full employment of resources in the economy

5.

If demand for golf balls decreases when the price of baseball gloves decreases, we can stay that baseball gloves and golf balls players are

a)

normal goods

b)

inferior goods

c)

substitute goods

d)

complementary goods

e)

unrelated due to the substitution effect

6.

If the price of cars significantly increases, then the

a)

Supply of cars will increase

b)

supply of auto repair shops will decrease

c)

quantity supplied of cars will increase

d)

The demand for cars will decrease

e)

Car producers will find it more profitable to produce trucks

7.

Which of the following will NOT cause the demand for video games to change?

a)

a change in the price of a close substitute

b)

a change in consumer incomes

c)

a change in the price of video games

d)

a change in consumer tastes

e)

a change in consumer preferences

8.

A leftward shift of the supply curve for avocados ( a normal good) might be caused by:

a)

an improvement in avocado picking techniques

b)

a decrease in the wages that must be paid to avocado pickers

c)

an increase in consumer incomes

d)

some avocado farmers leaving the market

e)

a news report stating that avocados are associated with good health

9.

Assuming Ramen is an inferior good, a decrease in income will shift the:

a)

supply curve for Ramen to the left

b)

supply curve for Ramen to the right

c)

demand curve for ramen to the right

d)

demand curve for ramen to the left

e)

there is no shift

10.

When the government establishes a binding price floor on a good or service then there will be:

a)

An increase in demand for that good or service

b)

a surplus because of the quantity demand will decrease

c)

a shortage because the quantity supplied will decrease

d)

no incentive to place a tax on the good or service

e)

a decrease in the price once the market adjusts

11.

Claire is an economist who can earn $150 per hour. She is also an excellent chef who can cook three times as fast as the best chef in the area, whose hourly wage is $20 per hour. Which of the following is a correct economic statement?

a)

Claire has a comparative advantage in economics so she should specialize in econ and hire the chef to cook for her

b)

Claire has an absolute and comparative advantage in both econ and cooking, so she should work as an economist and as a chef

c)

claire is 3 times faster than any chef so she could give up econ and be a chef

d)

when chefs work for economists, they should charge $150 per hour instead of $20 per hour

e)

Because claire is an excellent chef, when the best chef works for claire, she should pay the chef only 1/3 the hourly rate.

12.
An economist would probably state that in a market economy, prices are generally determined by the interaction between 
a)
buyers and sellers
b)
wholesalers and retailers
c)
producers and labor unions
d)
consumers and government officials
13.
The US can produce 200 airplanes or 400 trucks. Japan can produce 300 trucks or 100 airplanes. 
Which country has the comparative advantage in producing trucks and what is their opportunity cost? 
a)
Japan, 1/3 airplane per truck
b)
US, 1/2 airplane per truck
c)
US, 2 airplanes per truck
d)
Japan, 3 airplanes per truck
14.
Which of the following is NOT one of the three basic questions of economics when looking at economic systems? 
a)
What goods should be produced ?
b)
What is the price of the goods? 
c)
How should the goods be produced? 
d)
Who gets to consume the goods? 
15.
The major types of resources used to make a product are called  
a)
natural resources
b)
factors of reduction
c)
factors of production
d)
capital resources
16.

Refer to the above diagram, in which S1 and D1 represent the original supply and demand curves and S2 and D2 the new curves. In this market the indicated shift in supply may have been caused by:

a)

an increase in the wages paid to workers producing this good.

b)

the development of more efficient machinery for producing this commodity.

c)

this product becoming less fashionable.

d)

an increase in consumer incomes.

17.
The "Invisible Hand" is the term Economist Adam Smith used to describe:
a)
comparative advantage
b)
effect of self interest on markets
c)
diminishing marginal utility
d)
how some countries utilize resources better
18.
What is the difference between a shortage and scarcity? 
a)
A shortage is temporary but scarcity always exists 
b)
A shortage results from rising prices; scarcity results from falling prices 
c)
A shortage is lack of all goods and services; scarcity concerns a single item 
d)
There is no real difference between a shortage and scarcity
19.

Allie is shopping when she finds a pair of running shoes priced at $90. When Allie uses her debit card to pay, it is declined because her balance is insufficient to cover the cost of the running shoes. Allie’s situation best illustrates which economic concept?

a)

Opportunity cost

b)

Scarcity

c)

Trade-offs

20.

Which of the following contributes to the economic problem of scarcity?

a)

Resources have alternative uses.

b)

Resources are unlimited.

c)

Human wants are limited.

21.

Which of the following illustrates the effect of a decrease in an economy’s resources using a production possibilities curve (PPC)?

a)

The economy’s PPC will shift outward and to the right.

b)

The economy’s PPC will shift inward and to the left.

c)

The economy’s PPC will remain the same.

22.

A city government received a $1 million grant to build swimming pools and skating rinks for youth. Based on the data provided in the graph, what is the opportunity cost of building one swimming pool?

a)

0.50 skating rink

b)

2 skating rinks

c)

2 swimming pools

23.

The shape of a PPC illustrates the type of opportunity costs involved in production. What type of costs do PPC1 and PPC2 illustrate?

a)

PPC1 illustrates constant opportunity costs and PPC2 illustrates increasing opportunity costs.

b)

PPC1 illustrates increasing opportunity costs and PPC2 illustrates decreasing opportunity costs.

c)

PPC1 illustrates increasing opportunity costs and PPC2 illustrates constant opportunity costs.

24.

Based on the data provided, which of the following terms of trade are mutually beneficial for the two countries?

a)

1 ton of coffee for 3 trucks

b)

1 ton of coffee for 4 trucks

c)

1 ton of coffee for 5 trucks

25.

Which of the following describes the relationship between price and quantity demanded according to the law of demand?

a)

Negative relationship, illustrated by a horizontal demand curve

b)

Positive relationship, illustrated by a downward-sloping demand curve

c)

Negative relationship, illustrated by a downward-sloping demand curve

26.

The diagram above shows two demand curves for video games identified as D1 and D2.

Which of the following changes will most likely cause a shift of the demand curve from D1 to D2 as shown in the diagram?

a)

A decrease in the price of mobile games, a substitute good

b)

Michael has a comparative advantage in changing tires.

c)

Michael has an absolute and a comparative advantage in changing oil.

27.

Which of the following changes will increase the demand for bicycles?

a)

An increase in the price of bicycle helmets, a complementary good

b)

An increase in the price of scooters, a substitute good

c)

A decrease in the price of bicycles

28.

Which of the following will increase the market supply for new automobiles?

a)

An increase in subsidies to automobile manufacturers

b)

An increase in the price of steel, an input in the production of automobiles

c)

An increase in the price of gasoline, a complementary good

29.

When the price of a candy bar is $6.00, which of the following is true?

a)

The market does not clear because the price is lower than the equilibrium price and there will be a shortage in the market.

b)

The market does not clear because the price is higher than the equilibrium price and there will be a surplus in the market.

c)

The market does not clear because the price is higher than the equilibrium price and there will be a shortage in the market.

30.

The supply (S) and demand (D) for a good are shown in the diagram above.

At a price of P2 in the diagram above which of the following will happen in the market?

a)

  • There will be a shortage of 30 units and 90 units will be exchanged.

b)

  • There will be a surplus of 30 units and 90 units will be exchanged.

c)

  • There will be a surplus of 60 units and 30 units will be exchanged.

31.

Matcha green tea is primarily cultivated by Japanese farmers. Suppose that Matcha green tea grows in popularity as its health benefits, and at the same time the government reduces taxes imposed on Japanese tea farmers. What is the likely effect on the equilibrium price and quantity in the Japanese Matcha tea market?

a)

Price decreases, and quantity decreases.

b)

Price is indeterminate, and quantity decreases.

c)

Price is indeterminate, and quantity increases.

32.
An economist would probably state that in a market economy, prices are generally determined by the interaction between 
a)
buyers and sellers
b)
wholesalers and retailers
c)
producers and labor unions
d)
consumers and government officials
33.
Which of the following is likely to increase the demand for peanut butter?
a)
Fewer children in the population
b)
News that insects have destroyed much of the peanut crop and that there will be less peanut butter on the shelves in three months.
c)
A big increase in the price of jelly.
d)
A report from the Surgeon General of the United States that eating peanut butter makes people nutty.
34.
In economics, a shortage of a product occurs when
a)
the product's price falls below its market-clearing level
b)
the product's market-clearing level reduces overall demand
c)
the people who buy the product consume more than they need
d)
the businesses producing the product become less efficient
35.
The US can produce 200 airplanes or 400 trucks. Japan can produce 300 trucks or 100 airplanes. 
Which country has the comparative advantage in producing trucks and what is their opportunity cost? 
a)
Japan, 1/3 airplane per truck
b)
US, 1/2 airplane per truck
c)
US, 2 airplanes per truck
d)
Japan, 3 airplanes per truck
36.
The US can produce 200 airplanes or 400 trucks. Japan can produce 300 trucks or 100 airplanes. 
Which country has the comparative advantage in producing airplanes and what is their opportunity cost? 
a)
Japan, 1/3 trucks per airplane
b)
US, 1/2 trucks per airplane
c)
US, 2 trucks per airplane
d)
Japan, 3 trucks per airplane
37.

Suppliers often reduce prices because they

a)

have a shortage of products

b)

have a surplus of products to sell

c)

want decrease consumer demand

d)

want to increase the product supply

38.
What does the Production Possibilities Frontier represent? 
a)
A.  A catalog of all possible production options, represented as percentages.
b)
B. The tradeoffs between possible production levels for two goods.
c)
C. The amount that a society could produce if it devoted all its resources to producing one good.
d)
D. The possible gains from international trade in two or more goods.
39.
The resource that includes equipment, machinery, buildings, and tools.
a)
Land
b)
Labor
c)
Capital 
d)
Entrepreneur
40.
The major types of resources used to make a product are called  
a)
natural resources
b)
factors of reduction
c)
factors of production
d)
capital resources
41.

Refer to the above diagram. This economy will experience cyclical unemployment if it produces at point:

a)

A

b)

B

c)

C

d)

D

42.

Refer to the above diagram. At which point will this economy NOT be able to produce, it is currently unattainable?

a)

A

b)

B

c)

C

d)

E

43.

When the price of a product rises, consumers shift their purchases to other products whose prices are now relatively lower. This statement describes:

a)

an inferior good.

b)

the rationing function of prices.

c)

the substitution effect.

d)

the income effect.

44.

An increase in demand means that:

a)

given supply, the price of the product will decline.

b)

the demand curve has shifted to the right.

c)

price has declined and consumers therefore want to purchase more of the product.

d)

the demand curve has shifted to the left.

45.

Refer to the above diagram, in which S1 and D1 represent the original supply and demand curves and S2 and D2 the new curves. In this market the indicated shift in supply may have been caused by:

a)

an increase in the wages paid to workers producing this good.

b)

the development of more efficient machinery for producing this commodity.

c)

this product becoming less fashionable.

d)

an increase in consumer incomes.

46.
The "Invisible Hand" is the term Economist Adam Smith used to describe:
a)
comparative advantage
b)
effect of self interest on markets
c)
diminishing marginal utility
d)
how some countries utilize resources better
47.
The Wealth of Nations is ______________'s most famous work.
a)
David Ricardo
b)
Adam Smith
c)
F.A. Hayek
d)
Friedrich Neitsze
48.
According to comparative advantage, a good should be produced at the point where
a)
its explicit costs are least.
b)
its opportunity costs are least
c)
the cost of real resources used is least.
d)
production can occur with the greatest impact on employment
49.
The Law of Demand says that price and quantity have a(n)
a)
direct relationship
b)
inverse relationship
c)
PPC focus
d)
Diminishing Motility
50.

Related goods impacts Demand because its relationship to what determinant of Demand?

a)

Increasing Marginal Cost

b)

Diminishing Marginal Utility

c)

Scarcity

d)

Substitution Effect

51.
The diagram shows the production possibilities curve for Country Y. Which of the following statements is true?
a)
If Country Y is producing at point C, it is using all its resources efficiently
b)
The opportunity cost of producing more machines is constant
c)
Country Y cannot produce at point E
d)
The most efficient point of production is point D
52.
Two alternative production possibility frontiers for apples and wheat are shown in the figures. As more wheat is produced, how will the opportunity cost of producing wheat, as represented in Figures 1 and 2, be affected? 
a)
Figure 1: Decrease / Figure 2: Increase
b)
Figure 1: Increase / Figure 2: Decrease
c)
Figure 1: No Change / Figure 2: Increase
d)
Figure 1: No Change / Figure 2: Decrease
53.

The economic problem is that

a)

resources are limited and wants are limited.

b)

resources are unlimited and wants are limited.

c)

resources are limited and wants are unlimited.

d)

resources are unlimited and wants are unlimited.

54.
What is the difference between a shortage and scarcity? 
a)
A shortage is temporary but scarcity always exists 
b)
A shortage results from rising prices; scarcity results from falling prices 
c)
A shortage is lack of all goods and services; scarcity concerns a single item 
d)
There is no real difference between a shortage and scarcity
55.

In the time period covered by the production possibilities curve, the company decides to make 4 gallons of red paint. How many gallons of blue paint can the company make with the available time and resources?

a)

2

b)

3

c)

6

d)

8

56.
The special human resource, distinct from labor, which takes initiative, makes business decisions, innovates, and takes risk, the income from which is called profit.
a)
Productive Efficiency
b)
Entrepreneurship
c)
Utility
d)
Factors of Production
57.
The process of producing and purchasing capital goods, often confused with the microeconomic concept of buying stocks and bonds, etc. 
a)
Full employment
b)
Economic Growth
c)
Productive Efficiency
d)
Investment
58.
__________study of how people (including companies/countries) make choices on buying, selling, using, and distributing goods/services.
a)
Economics
b)
Consumer Science
c)
Opportunity Costs
59.
The idea that resources are limited; we don't have an unlimited supply of what we want
a)
scarcity
b)
supply
c)
demand
d)
inflation
60.

Human-made materials used to produce goods and services.

a)

capital

b)

land

c)

labor

d)

entrepreneur

61.

An economy where the government controls the factors of production resources.

a)

command

b)

market

c)

capitalism

d)

mixed

62.

Point D on the graph is a period of:

a)

contraction

b)

expansion

c)

recession

d)

decline

63.
The diagram shows the production possibilities curve for Country Y. Which of the following statements is true?
a)
If Country Y is producing at point C, it is using all its resources efficiently
b)
The opportunity cost of producing more machines is constant
c)
Country Y cannot produce at point E
d)
The most efficient point of production is point D
64.
The simplified production possibilities curves for country A and B are shown. Which one of the following statements is correct?
a)
Country A has the comparative advantage in both goods
b)
Country A has the comparative advantage in chairs & Country B has the comparative advantage in shirts
c)
Country B has the absolute advantage in shirts only
d)
Country A has the comparative advantage in shirts & Country B has the comparative advantage in chairs
65.
Based on the table provided, which one of the following statements is correct?
a)
Japan has the absolute advantage in producing cars
b)
Japan has the comparative advantage in producing cars
c)
The United States has the absolute advantage in producing both cars and computers
d)
The opportunity cost of producing a car in Japan is 1/2 a computer
66.
If nations specialize according to their comparative advantage and engage in trade with each other, each nation can:
a)
Consume outside its production possibilities curve 
b)
Produce outside its production possibilities curve 
c)
Shift its production possibilities curve to the right 
d)
Produce more of all goods 
67.
If a price is above equilibrium price, it creates a...
a)
shortage
b)
surplus
c)
market price
d)
demand
68.
If a price is below the equilibrium price it creates a...
a)
shortage
b)
surplus 
c)
market price 
d)
supply
69.
For the law of demand, as price rises, what happens to quantity demanded?
a)
it goes up
b)
it goes down
c)
it stays the same
d)
it is not effected
70.
Thousands of people leave a small town due to a factory closing down.  Sales at the local grocery store become slow. What causes this change?
a)
Prices or availability of substitutes
b)
Prices or availability of complementary goods
c)
Change in the weather or season
d)
Change in the number of buyers
71.
Which statement expresses a central idea of how the laws of supply and demand work?
a)
The government sets the prices for goods and services.
b)
Prices are determined by the interaction of producers and consumers.
c)
Consumers alone determine the prices for goods and services.
d)
Technology dictates the prices charged for goods and services.
72.
What does this graph show?
a)
Shortage
b)
Surplus
c)
Supply Table
d)
Equilibrium
73.
If a price floor was set at 320, what quantity would be purchased?
a)
20
b)
40
c)
60
d)
80
74.
What is the Equilibrium Price?
a)
1
b)
2
c)
3
d)
4
75.
The movement from Point A to Point B represents a(n)
a)
increase in the price.
b)
decrease in the quantity supplied.
c)
shift in the supply curve.
d)
Both Orange and Blue are correct.

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