Basic Economic Concept Unit 1 (AP Economics)

(Table 7-2: The Market for Chocolate-Covered Peanuts) A surplus of 30 bags of chocolate-covered peanuts exists if the price is ________ per bag. a. $0.90 b. $0.80 c. $0.60 d. $0.40 e. $0.50

a. $0.90

Which of the following statements is a positive statement? Which is a normative statement? X: The federal minimum wage is increasing to $10 per hour. Y: The minimum wage should be high enough that families will not live in poverty. Z: A higher minimum wage typically increases the unemployment rate for teenagers. a. X is positive; Y is normative; Z is positive b. X is positive; Y is positive; Z is positive c. X is normative; Y is positive; Z is normative d. X is normative; Y is normative; Z is normative e. X is positive; Y is normative; Z is normative

a. X is positive; Y is normative; Z is positive

Economists believe that the supply of solar panels has recently increased. In a graph this means that a. at any price, producers are willing to supply more solar panels for sale in the market. b. at any quantity, producers are willing to accept a higher price for solar panels that they sell. c. the supply curve for solar panels has become steeper. d. the supply curve for solar panels has shifted leftward. e. the quantity of solar panels supplied has increased as the price has increased

a. at any price, producers are willing to supply more solar panels for sale in the market.

When Coca-Cola builds another beverage bottling plant in Ohio, the nation's _____ resources are increased. a. capital b. labor c. entrepreneurship d. natural e. land

a. capital

When we observe that Duncan's yearly demand curve for video games is vertical, rather than downward sloping, it tells us that a. no matter the price, he will always buy the same quantity of video games. b. when the price of a video game falls, he will purchase fewer video games. c. when the price of a video game falls, he will purchase more video games. d. no matter the quantity of video games he purchases, the price will remain the same. e. when the price of a video game rises, he will purchase fewer video games.

a. no matter the price, he will always buy the same quantity of video games.

In the soft drink market, an increase in the price of sugar, a necessary ingredient for soft drinks, and an increased concern about tooth decay caused by the consumption of soft drinks will result in which of the following? a. There will be an increase in both the equilibrium price and quantity b. Equilibrium quantity will decrease, but equilibrium price may decrease, increase, or stay the same. c. There will be a decrease in both equilibrium price and quantity. d. Equilibrium quantity will increase, but equilibrium price may decrease, increase, or stay the same. e. Equilibrium quantity will decrease, but equilibrium price will increase.

b. Equilibrium quantity will decrease, but equilibrium price may decrease, increase, or stay the same.

Two kids are responsible for chores around the house. It takes Eli 4 hours to clean his room and 1 hour to mow the lawn. It takes Max 5 hours to clean his room and 2 hours to mow the lawn. a. Eli has comparative advantage in cleaning his room and Max has comparative advantage in mowing the lawn. b. Max has comparative advantage in cleaning his room and Eli has comparative advantage in mowing the lawn. c. Neither kid has comparative advantage in cleaning his room or mowing the lawn. d. Eli has absolute advantage in cleaning his room and comparative advantage in cleaning his room. e. Max has absolute advantage in both cleaning his room and mowing the lawn.

b. Max has comparative advantage in cleaning his room and Eli has comparative advantage in mowing the lawn.

When the price of gasoline goes up and the demand for tires goes down, this means tires and gasoline are: a. substitutes. b. complements. c. both expensive. d. both inexpensive. e. inferior goods.

b. complements.

Economists are generally in support of: a. government restrictions on trade. b. free international trade. c. tariffs to restrict trade. d. subsidizing exports. e. import quotas to protect domestic producers.

b. free international trade.

The market for corn is currently in equilibrium. Which of the following is most likely to increase the equilibrium price of corn? a. a bountiful harvest b. increasing production of corn-based ethanol c. decreasing household incomes and corn is a normal good d. a subsidy given by the government to growers of corn e. the price of soybeans, an alternative crop for many farmers, is rising.

b. increasing production of corn-based ethanol

(Figure 4-5: Comparative Advantage and the Production Possibility Curve) In the figure, trade will be beneficial for both countries in all of the following cases except: a. 1 computer is traded for more than 1/2 box of roses but fewer than 2 boxes of roses. b. 1 computer is traded for 1 box of roses. c. 1 computer is traded for 2 1/2 boxes of roses. d. 1 computer is traded for 3/4 box of roses. e. 1 computer is traded for 1 1/2 boxes of roses.

c. 1 computer is traded for 2 1/2 boxes of roses.

Consider the market for iPods. What happens if a fantastic new alternative MP3 player is developed and, at the same time, a boat carrying a large shipment of iPods is attacked by sea monsters and sunk? a. Price decreases and quantity increases. b. Price increases and quantity increases. c. The change in price is uncertain and quantity decreases. d. Price increases and the change in quantity is uncertain. e. Price decreases and the change in quantity is uncertain.

c. The change in price is uncertain and quantity decreases.

(Figure 3-4: Production Possibility Curve for Tealand) In the figure, Tealand can only experience point E if the government: a. eliminates unemployment. b. raises taxes. c. encourages more immigration to expand the size of the workforce. d. lowers the cost of production by decreasing the use of technology. e. increases barriers to trade with other nations.

c. encourages more immigration to expand the size of the workforce.

A high-school graduate who gets a college degree is adding to the economy's stock of: a. labor. b. capital. c. human capital. d. financial capital. e. natural resources.

c. human capital.

Market-based economies are characterized by a. government control of property and price incentives. b. scarce resources and prices set by government economists. c. private property rights and price incentives. d. scarce resources and price controls. e. an unlimited quantity of resources and price incentives.

c. private property rights and price incentives.

The basic concern of economics is: a. to keep business firms from losing money. b. to prove that capitalism is better than socialism. c. to study the choices people make. d. to use unlimited resources to produce goods and services to satisfy limited wants. e. to increase the amount of wealth in the economy.

c. to study the choices people make.

Khalil is offered a free ticket to the opera. His opportunity cost of going to the opera is: a. zero—the tickets were free. b. the price listed on the ticket. c. whatever Khalil would have done had he not gone to the opera. d. the price listed on the ticket plus whatever Khalil would have done had he not gone to the opera. e. the price listed on the ticket minus whatever Khalil could have received by selling it to another person in the parking lot.

c. whatever Khalil would have done had he not gone to the opera.

Which of the following is a microeconomic question rather than a macroeconomic question? a. "Will a decrease in the income tax rate lift the nation out of a recession?" b. "Will an increase in consumer spending create inflation?" c. "Will a decrease in the income tax rate create a budget deficit?" d. "Will an increase in the cigarette tax cause a decrease in the number of smokers?" e. "Will lower interest rates increase investment spending and decrease the unemployment rate?"

d. "Will an increase in the cigarette tax cause a decrease in the number of smokers?"

Which of the following best describes the typical upward sloping shape of supply curves? a. As the price of corn ethanol rises, farmers plant more acres of soybeans. b. As the technology used in producing video games increases, more video games are produced. c. As the tax subsidy on health insurance for families increases, more families can afford to purchase health insurance. d. As the price of cattle falls, ranchers are less willing to sell their cattle at livestock auctions. e. As taxes on cigarettes rise, more cigarette smokers decide to quit smoking.

d. As the price of cattle falls, ranchers are less willing to sell their cattle at livestock auctions.

An increase in supply of a good is caused by: a. an increase in input prices. b. suppliers' expectations of higher future prices for the good. c. an increase in the price of the good. d. a decrease in prices of goods that are substitutes in production. e. a decrease in the number of firms producing the good.

d. a decrease in prices of goods that are substitutes in production.

In terms of the production possibility curve, inefficient use of available resources is shown by: a. an increase in the labor force growth rate. b. a movement from one point to another along the production possibility curve. c. an inward shift of the production possibility curve. d. a point located inside the production possibility curve. e. a point located outside the production possibility curve.

d. a point located inside the production possibility curve.

If there is a tremendous natural disaster, the effect can be shown by: a. a point interior to the production possibility curve. b. an outward expansion of the production possibility curve. c. a movement from one point to another along the production possibility curve. d. an inward contraction of the production possibility curve. e. a flatter slope of the production possibility curve.

d. an inward contraction of the production possibility curve.

Assume that corn is an input in the production of beef but not in the production of pork. Further, beef and pork are substitutes. A decrease in the price of corn will: a. increase the supply of beef and increase the demand for pork. b. decrease the supply of beef and increase the demand for pork. c. decrease the supply of beef and decrease the demand for pork. d. increase the supply of beef and decrease the demand for pork. e. decrease the supply of beef and have no impact on the demand for pork.

d. increase the supply of beef and decrease the demand for pork.

The economy's factors of production are not equally suitable for producing different types of goods. This principle generates: a. economic growth. b. technical efficiency. c. resource underutilization. d. increasing opportunity cost. e. the law of demand.

d. increasing opportunity cost.

A nation's copper mines is part of that nation's _____ resource. a. labor b. capital c. entrepreneurial d. land e. manufactured

d. land

In one hour, the United States can produce 25 tons of steel or 250 automobiles. In one hour, Japan can produce 30 tons of steel or 275 automobiles. This information implies that: a. Japan has a comparative advantage in the production of automobiles. b. the United States has an absolute advantage in the production of steel. c. Japan has a comparative advantage in the production of both goods. d. the United States has a comparative advantage in the production of automobiles. e. the United States should export steel to Japan in exchange for automobiles

d. the United States has a comparative advantage in the production of automobiles.

Market demand for a good is initially made up of 50 buyers. Suppose there is a decrease in the number of buyers by 10. Holding everything else constant, one would expect that: Incorrect Response a. the supply curve shifts left. b. the quantity supplied will increase. c. the supply curve shifts right. d. the quantity supplied will decrease. e. the price increased.

d. the quantity supplied will decrease.

Suppose at a price of $5, Jackie demands 4 gadgets each week. At a price of $4, Jackie also demands 4 gadgets each week. It must be the case that Jackie's demand curve for gadgets is: a. upward sloping. b. non-existant. c. downward sloping. d. vertical. e. horizontal.

d. vertical

Table 3-3: Trade-off of Study Time and Leisure Time) A student sleeps 8 hours per day and divides the remaining time between study time and leisure time. The table shows the combinations of study and leisure time that can be produced in the 16 waking hours of each day. Suppose the student completes a speed-reading course that allows him to do the same amount of studying in half as many hours. Which of the following is now true of his opportunity costs? Quantity of Hours of Study Time Quantity of Hours of Leisure Time 16 0 12 4 8 8 4 12 0 16 a. The opportunity cost of both leisure and of studying has increased. b. The opportunity cost of studying has increased. c. The opportunity cost of leisure has decreased. d. There is no change in the opportunity costs. e. The opportunity cost of leisure has increased.

e. The opportunity cost of leisure has increased.

When economists say that the "demand for apples has decreased", it means that a. at any quantity demanded, the price of apples has risen. b. lower prices will result in an increase in the quantity of apples demanded. c. higher prices will result in an increase in the quantity of apples demanded. d. the demand curve for apples has shifted to the right. e. at any price, the quantity of apples demanded has fallen.

e. at any price, the quantity of apples demanded has fallen.