Loading test…

AP Macroeconomics Unit 1: Basic Economic Concepts

12 questions

Header banner

Unit 1: Basic Economic Concepts

0 of 12 answered

~7 min left

Question 1

A point located inside (below) the production possibilities curve (PPC) indicates that an economy is:

A.Operating at full efficiency with no unused resources.B.Producing an output combination that is currently unattainable.C.Using resources inefficiently or leaving some resources unemployed.D.Experiencing economic growth that has shifted the PPC outward.

Question 2

In a market with a binding price floor set above equilibrium, which of the following outcomes is most likely?

A.A shortage, because quantity demanded exceeds quantity supplied at the floor price.B.A surplus, because quantity supplied exceeds quantity demanded at the floor price.C.No effect, because markets always clear at the equilibrium price.D.A decrease in supply, as producers find the good unprofitable.

Question 3

A country can produce either 100 units of wheat or 50 units of cloth per day. If it currently produces 80 units of wheat, what is the opportunity cost of producing the 80th unit of wheat?

A.0.5 units of clothB.2 units of clothC.1 unit of clothD.50 units of cloth

Question 4

Country A's opportunity cost of producing 1 unit of wheat is 3 units of cloth. Country B's opportunity cost of producing 1 unit of wheat is 2 units of cloth. Which of the following trade arrangements could benefit both countries?

A.Country A exports wheat to Country B at a rate of 4 cloth per wheat.B.Country B exports wheat to Country A at a rate of 2.5 cloth per wheat.C.Country A exports wheat to Country B at a rate of 1.5 cloth per wheat.D.No trade is beneficial because Country B has lower opportunity costs.

Question 5

An economy currently produces at a point on its PPC. Technological improvement occurs only in the production of manufactured goods. How does the PPC shift?

A.The entire PPC shifts outward proportionally.B.The PPC rotates outward along the manufactured-goods axis only.C.The PPC shifts inward along the manufactured-goods axis.D.The PPC does not change because no new resources were added.

In-content ad

Question 6

Country Alpha can produce 10 cars or 20 tons of grain per worker-day. Country Beta can produce 6 cars or 18 tons of grain per worker-day. According to the principle of comparative advantage, which country should specialize in cars?

A.Alpha, because it has absolute advantage in both goods.B.Alpha, because its opportunity cost of a car is 2 tons of grain, lower than Beta's 3 tons.C.Beta, because it produces fewer cars and should focus on improving.D.Beta, because its opportunity cost of grain is lower.

Question 7

The law of increasing opportunity costs suggests that a PPC is bowed outward (concave to the origin) because:

A.Resources are perfectly interchangeable between all uses.B.Resources are not equally productive in all uses, so shifting them grows increasingly costly.C.Technology improves as more of a good is produced.D.Demand for each good increases as the economy grows.

Question 8

If the price of coffee rises significantly, what is the most likely effect on the demand for tea, a substitute good?

A.Demand for tea decreases, shifting the demand curve left.B.Demand for tea increases, shifting the demand curve right.C.The supply of tea increases, shifting the supply curve right.D.There is no effect on the tea market because markets are independent.

Question 9

A decrease in the price of steel (an input to car production) will most likely:

A.Shift the demand curve for cars to the right.B.Shift the supply curve for cars to the right, lowering the equilibrium price.C.Shift the supply curve for cars to the left, raising the equilibrium price.D.Have no effect on the car market because steel and cars are in different industries.

Question 10

Two countries can both gain from trade even if one country has an absolute advantage in producing all goods. This is explained by:

A.The principle of absolute advantage — the more productive country always benefits.B.The principle of comparative advantage — each country specializes in the good where its opportunity cost is lower.C.The terms of trade, which always equalize wages across countries.D.Economies of scale, which reduce costs as output expands.

In-content ad

Question 11

In a competitive market, the price of good X rises. Which of the following best describes what happens to producer surplus?

A.Producer surplus decreases because higher prices deter consumers.B.Producer surplus increases because sellers receive more above their minimum acceptable price.C.Producer surplus is unchanged because the supply curve does not shift.D.Producer surplus decreases because quantity supplied increases, raising costs.

Question 12

Which of the following best illustrates the economic concept of scarcity?

A.A government imposes a price ceiling on gasoline.B.Human wants exceed the resources available to satisfy them.C.A firm earns zero economic profit in the long run.D.A consumer buys fewer goods when income falls.

AP Macroeconomics Unit 1: Basic Economic Concepts — Free with Answer Explanations | Test Practice Hub