AP Macroeconomics Unit 1 Study Questions (Credit to College Board, Houstonisd.org and appropriate Brainly.com users)

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. Unlimited Resources

D. Trade-offs

E. Trade

Scarcity- Scarcity refers to the situation when there are unlimited wants and limited resources. In the given scenario, Allie wanted to buy running shoes which cost her $90. However, her debit card was declined because she did not have enough resources (money) to pay for the shoes. Scarcity is a rather common concept which is applied all over the world because people have unlimited wants and limited resources to cover their demands.

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Which of the following is not a scarce resource?

A. Land

B. Labor

C. Capital

D. Entrepreneurship

E. Stocks

Stocks- Stocks are not a factor of production and therefore are not a scarce resource. All factors of production—land, labor, capital, and entrepreneurship—are scarce resources.

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Which of the following is not a factor of production?

A. Labor

B. Capital

C. Land

D. Goods and Services

Goods and services are not factors of production.

Factors of production are inputs that are needed to provide goods or services. They include, land, labor, capital, and entrepreneurship.

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

A. Human wants are insufficient.

B. Resources are unlimited.

C. Resources are efficient.

D. Resources are expensive.

E. Resources have alternative uses.

Resources have alternative uses- When a resource has an alternative use, there are multiple needs for the resource and so it is scarce.

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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 inward and to the left.

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

C. The economy's PPC will become steeper.

D. The economy's PPC will become flatter.

E. The economy's PPC will remain the same.

The economy's PPC will shift inward. The PPC will shift inward and to the left to indicate a reduction in capacity as a result of the decrease in resources.

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Michael and Martha run a mechanic shop. In one hour Michael can perform eight oil changes or change ten tires. In one hour Martha can perform seven oil changes or change fourteen tires. Given this information which of the following is true?

A. Martha has a comparative advantage in changing oil.

B. Martha has an absolute advantage in changing oil.

C. Michael has a comparative advantage in changing tires.

D. Michael has an absolute advantage in changing tires.

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

Michael has an absolute and a comparative advantage in changing oil. Absolute advantage describes a situation in which an individual can produce more of one good than any other person using the same amount of resources. Michael has an absolute advantage over Martha in changing oil because Michael can perform 8 oil changes in one hour while Martha can only perform 7 oil changes in one hour. Comparative advantage describes a situation in which an individual can produce a good or provide a service at a lower opportunity cost than another individual. Martha's opportunity cost of performing 1 oil change is 2 tire changes, while Michael's opportunity cost of performing 1 oil change is 1.25 tire changes. Therefore, Michael has a comparative advantage in oil changes.

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

A. Positive relationship, illustrated by an upward- sloping demand curve

B. Positive relationship, illustrated by a downward-sloping demand curve

C. Negative relationship, illustrated by horizontal demand curve

D. Negative relationship, illustrated by an upward-sloping demand curve

E. Negative relationship, illustrated by a downward-sloping demand curve

Negative relationship, illustrated by a downward-sloping demand curve. According to the law of demand, price and quantity demanded move in opposite directions (an inverse, or negative, relationship), leading to a downward-sloping demand curve. As price increases, the quantity demanded decreases, which leads to a downward-sloping demand curve. A positive, upward-sloping curve would be the result of a relationship between price and quantity where an increase in price leads to an increase in quantity, which is not supported by the law of demand.

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Country X is a major buyer of Country Y's grains. Assume Country X's government announced an increase in taxes on its imports of Country Y's grains effective next month. How will this news likely affect consumers' demand for grains in Country X?

A. It will increase now because the tax on imported grains will increase the future price of grains.

B. It will decrease now because the tax on imported grains will increase the future price of grains.

C. It will not change now because the tax on imported grains will increase the future price of grains.

D. It will increase now because the tax on imported grains will increase the current price of grains

E. It will decrease now because the tax on imported grains will increase the current price of grains

It will increase now because the tax on imported grains will increase the future price of grains. A change in price expectations about the future price of a product is a determinant of demand. When Country X's consumers expect the future price of grains to increase because of the tax on imported grains, they are better off buying more grains now at the lower price than later in the future at a higher price. Therefore, Country X's consumers' demand for grains will increase now because of the increase in price expectations.

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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

D. A decrease in consumers' income

E. A decrease in the number of buyers

An increase in the price of scooters, a substitute good. An increase in the price of scooters (a substitute good) increases the demand for bicycles and shifts the demand curve to the right. (https://quizlet.com/310840867/ap-economics-flash-cards/)

Which of the following describes the relationship between price and quantity supplied according to the law of supply?

A. Positive relationship, illustrated by an upward-sloping supply curve

B. Positive relationship, illustrated by a downward-sloping supply curve

C. Positive relationship, illustrated by a horizontal supply curve

D. Negative relationship, illustrated by an upward-sloping supply curve

E. Negative relationship, illustrated by a downward-sloping supply curve

Positive relationship, illustrated by an upward-sloping supply curve. According to the law of supply, price and quantity supplied have a positive relationship, illustrated by an upward-sloping supply curve. With all else being constant, as the price increases, the quantity supplied increases, which leads to an upward-sloping supply curve. (https://quizlet.com/310840867/ap-economics-flash-cards/)

The crucial problem of economics is

A. establishing a fair tax system.

B. providing social goods and services.

C. developing a price mechanism that reflects the relative scarcities of products and resources.

D. allocating scarce productive resources to satisfy wants.

E. enacting a set of laws that protects resources from overuse.

Allocating scarce productive resources to satisfy wants

When one decision is made, the next best alternative not selected is called

A. economic resource.

B. opportunity cost.

C. scarcity.

D. comparative disadvantage.

E. production.

Opportunity cost

Which of the following is true if the production possibilities curve is a curved line concave to the origin?

A. Resources are perfectly substitutable between the production of the two goods.

B. It is possible to produce more of both products.

C. Both products are equally capable of satisfying consumer wants. D. The prices of the two products are the same.

E. As more of one good is produced, more and more of the other good must be given up.

As more of one good is produced, more and more of the other good must be given up.

Which of the following is true of the concept of increasing opportunity cost?

A. It is unimportant in command economies because of central planning.

B. It suggests that the use of resources to produce a set of goods and services means that as more of one is produced, some of the other must be sacrificed.

C. It is irrelevant if the production possibilities curve is convex to the origin.

D. It suggests that unlimited wants can be fulfilled.

E. It means that resources are plentiful and opportunities to produce greater amounts of goods and services are unlimited.

It suggests that the use of resources to produce a set of goods and services mean that as more of one is produced, some of the other must be sacrificed.

To be considered scarce, an economic resource must be which of the following? I. Limited II. Free III. Desirable

A. I only

B. I and II only

C. II and III only

D. I and III only

E. I, II and III

I and III only

The basic economic problem is reflected in which of the following concepts? I. Opportunity cost II. Production possibilities III. The fallacy of composition IV. Ceteris paribus

A. I only

B. IV only

C. I and II only

D. II and III only

E. II, III and IV only

I and II only

Which of the following would cause a leftward shift of the production possibilities curve?

A. An increase in unemployment

B. An increase in inflation

C. An increase in capital equipment

D. A decrease in consumer demand

E. A decrease in working-age population

A decrease in working-age population

Which of the following would cause an outward or rightward shift in the production possibilities curve?

A. An increase in unemployment

B. An increase in inflation

C. An increase in capital equipment

D. A decrease in natural resources

E. A decrease in the number of workers

A decrease in the number of workers

An increase in the price of peanut butter will cause the demand curve for jelly to shift in which of the following directions?

A. To the right, because peanut butter is a product that the government says is good for you

B. To the right, if jelly is purchased by people with lower incomes and peanut butter is a luxury good for them

C. To the right, if peanut butter and jelly are complementary goods

D. To the left, if peanut butter and jelly are complementary goods

E. To the left, if peanut butter and jelly are substitute goods

To the left, if peanut butter and jelly are complementary goods

An increase in the price of gasoline will most likely cause the demand curve for tires to change in which direction?

A. To the left, because gasoline and tires are substitutes

B. To the left, because gasoline and tires are complements

C. To the right, because gasoline and tires are substitutes

D. To the right, because gasoline and tires are complements

E. To the right, because an increase in the price of gasoline makes consumers poorer and thus not willing to pay as much for tires

To the left, because gasoline and tires are complements