AP Micro REVIEW 1 Basics

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Score: (100%)

1.

24

24

If an economy has to sacrifice only one unit of good X for each unit of good Y produced
throughout the relevant range, then its production possibilities curve has a(n):

2.

constant, negative slope. (correct answer, your response)

increasing, negative slope.

zero slope.

decreasing, negative slope.

Points earned: 1 out of 1

2.

Trade can be beneficial to an economy because:

more goods and services can be obtained at lower opportunity cost. (correct answer, your
response)

it prevents specialization in those activities in which countries have a comparative advantage.

it results in a more efficient use of the combined resources of some of the trading countries, even
though it reduces efficiency in others.

it prevents unemployment.
3.
Points earned: 1 out of 1

3.

When the nations that comprise the Organization of Petroleum Exporting Countries (OPEC)
restrict the supply of oil to increase their profits:
the market fails because there is no longer an equitable allocation of resources.
the oil market achieves an efficient outcome because profits increase.

the oil market achieves an equitable outcome because the nations with oil resources receive the
profits commensurate with that resource.

the market fails because there is no longer an efficient allocation of resources. (correct answer,
your response)

4.
Points earned: 1 out of 1

4.

Technological improvements will:

shift the production possibilities curve outward. (correct answer, your response)

necessarily lead to increased unemployment.

shift the production possibilities curve inward.

leave the production possibilities curve unchanged.

5.
Points earned: 1 out of 1

5.

In most cases, economic efficiency is achieved through:

individuals seeking out opportunities to make themselves better off.

all of the above. (correct answer, your response)

incentives built into a market economy.

the invisible hand.

6.
Points earned: 1 out of 1

6.

Which of the following is false in the circular-flow diagram?

Households are the primary demanders of goods and services.
Money flows in the opposite direction as goods and services and factors of production.

Money flows from households to firms as households offer factors of production for sale. (correct
answer, your response)

Firms are the primary suppliers of goods and services.

7.
Points earned: 1 out of 1

7.

Scarcity in economics means:

the wants of people are limited.

not having sufficient resources to produce all the goods and services we want. (correct answer,
your response)

economists are clearly not doing their jobs.

there must be poor people in rich countries.
8.
Points earned: 1 out of 1

8.

If they bake only cakes, then in a single day George can bake 10 cakes while Greta can bake
5 cakes. If they only make pies, then in a single day George can bake 10 pies while Greta can
bake 4 pies. We then know that:
Greta has an absolute advantage and a comparative advantage in making pies.
George has an absolute advantage and a comparative advantage in making cakes.

George has an absolute advantage and a comparative advantage in making pies. (correct answer,
your response)

Greta has an absolute advantage and a comparative advantage in making cakes.

9.
Points earned: 1 out of 1

9.

When a nation experiences economic growth:

 it has moved to a more consumer-oriented position on its production possibilities curve.

its production possibilities curve shifts inward.
its production possibilities curve shifts outward. (correct answer, your response)
it has been able to reach full employment.
10.
Points earned: 1 out of 1

10. An economy is said to have a comparative advantage in the production of one good if it:
has the lowest opportunity cost for producing a particular good. (correct answer, your response)
can produce less of all goods than another economy.
has the highest opportunity cost for producing a particular good.
can produce more of all goods than another economy.
11.
Points earned: 1 out of 1

11. In an attempt to reduce shooting deaths, some cities have offered money to people who turn
in illegal guns. This program is an example of the government using ____ to influence
behavior.

marginal analysis

law

gains from trade

incentives (correct answer, your response)

12.
Points earned: 1 out of 1

12. The production possibilities curve illustrates that:

the economy will automatically end up at full employment.

if all resources of an economy are being used, more of one good can be produced only if less of
another good is produced. (correct answer, your response)

economic production possibilities have no limit.

an economy's productive capacity increases proportionally with its population.
13.
Points earned: 1 out of 1

13. When moving along a production possibilities curve, the opportunity cost to society of getting
more of one good:
is measured in dollar terms.
is constant.

is measured by the amount of the other good that must be given up. (correct answer, your
response)

usually decreases.
14.
Points earned: 1 out of 1

14. The best example of making a choice at the margin is:

buying a new car.

attending college.

drinking another cup of coffee. (correct answer, your response)

quitting your job.

15.
Points earned: 1 out of 1

15. Increases in total output realized when individuals specialize in particular tasks and trade are
known as:

the profits obtained from sales of a good or service.

a tradeoff.

the gains from trade. (correct answer, your response)

marginal analysis.

16.
Points earned: 1 out of 1

16. Assume that Brazil gives up 3 automobiles for each ton of coffee it produces, while Peru gives
up 7 automobiles for each ton of coffee it produces.

Brazil has a comparative advantage in automobile production and should specialize in automobile
production.

Brazil has a comparative advantage in automobile production and should specialize in coffee.

Brazil has a comparative advantage in coffee production and should specialize in the production of
automobiles.

Brazil has a comparative advantage in coffee production and should specialize in coffee production.
(correct answer, your response)

17.
Points earned: 1 out of 1

17. Who wrote The Wealth of Nations, a book that many credit with establishing economics as a
discipline?

Karl Marx

Adam Smith (correct answer, your response)

John Maynard Keynes

David Ricardo

18.
Points earned: 1 out of 1

18. According to economists, equilibrium exists when:

scarcity is eliminated.
output is distributed equitably.
an individual would be better off taking a different action.
no individual has an incentive to change their behavior. (correct answer, your response)
19.
Points earned: 1 out of 1

19. If the opportunity cost of manufacturing machinery is lower in the United States than in
Britain and the opportunity cost of manufacturing sweaters is higher in the United States than
in Britain, then the United States will:
export sweaters to Britain and import machinery from Britain.
export both sweaters and machinery to Britain.
import sweaters from Britain and export machinery to Britain. (correct answer, your response)
import both sweaters and machinery from Britain.
20.
Points earned: 1 out of 1

20. You can either spend $100 on a new economics textbook or a new CD player. If you choose to

buy the new economics textbook, the opportunity cost is:

impossible to determine.

the new CD player. (correct answer, your response)

both the $100 and the new CD player.

$100.

21.
Points earned: 1 out of 1

21. Marla will make $10 by tutoring for an additional hour but she will lose an hour of studying for
her own economics test. Marla decides to study rather than tutor. Marla's choice indicates that
she:

values an additional hour of studying more than the $10 she would earn tutoring. (correct answer,
your response)

values an hour of studying less than the $10 she would earn tutoring.
does not understand that there is no benefit from studying.
none of the above
22.
Points earned: 1 out of 1

22. Mr. Selfly likes to do everything himselfhe believes that no one does a job as well as he does
and he doesn't want to pay anyone to do them for him. He built his house, grows his
vegetables, makes his clothes and even plays the piano to entertain himself. Mr. Selfly does
not believe:

in specializing in production.

there are opportunity costs.

in the gains from trade.

in all of the above. (correct answer, your response)

23.
Points earned: 1 out of 1

23. Which of the following is not a factor of production?

machines and buildings

labor

land

money (correct answer, your response)

24.
Points earned: 1 out of 1

24. To encourage people to retire later, the government could:

engage in a public service campaign explaining the value of these employees to the economy.
lower social security benefits. (correct answer, your response)
raise the tax rate on older individuals.
do all of the above.
25.
Points earned: 1 out of 1