AP MarcoEconomic Unit 1 Test Review

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 curve C) Positive relationship, illustrated by a horizontal supply curve D) Negative relationship, illustrated by an upward sloping curve E) Negative relationship illustrated by a downward-sloping supply curve

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

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

A) The economy's PPC will shift inward and to the left

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

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

Use the table to answer the question below. The table above shows the daily production possibilities for China and Malaysia in producing trucks and coffee using the same amount of resources. 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 coffee for 5 trucks D) 1 truck for 1 ton for coffee E) 1 truck for 5 tons of coffee

B) 1 ton of coffee for 4 trucks

Which of the following changes will increase the demand for bicycles? A) An increase in the price of bicycle helmet, a complementary good B) An increase in the price of scooters, a substitute good C) A decrease in the price of the bicycles D) A decrease in consumers' income E) A decrease in the number of buyers

B) An increase in the price of scooters, a substitute good

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

B) Scarcity

Use the given possibilities curve (PPC) to answer the following question. 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) 0.50 swimming pool C) 2 skating rinks D) 2 swimming pools E) 5 skating rinks

C) 2 skating rinks

Use the graph to answer the question below (image not working) Matcha green tea is primarily cultivated by Japanese farmers. Suppose that Matcha green tea grows in popularity as its health benefits, namely its lower caffeine content, become known, 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) Prince increases, and quantity increases B) Price decreases, and quantity increases C) Price is indeterminate, and quantity increases D) Price in indeterminate, and quantity decreases E) Price decreases, and quantity is indeterminate

C) Price is indeterminate, and quantity increases.

Which of the following will increase the market supply for new automobiles? A)An increase in the price of steel, an input in the production of automobiles B) An increase in taxes on automobile manufacturers C) An increase in subsidies to automobile manufacturers D) An increase in consumers' income E) An increase in the price of gasoline, a complementary good

C)An increase in subsidies to automobile manufacturers

Use the graphs to answer the question below. 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 constant opportunity costs and PPC2 illustrates decreasing opportunity costs. C) PPC1 illustrates increasing opportunity costs and PPC2 illustrates decreasing opportunity costs. D) PPC1 illustrates increasing opportunity costs and PPC2 illustrates constant opportunity costs. E) PPC1 illustrates decreasing opportunity costs and PPC2 illustrates constant opportunity costs.

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

The table below shows the landscaping productivity of Simone and Irina during an eight hour workday. Simone can mow twelve lawns or trim twenty four trees in eight hours. Irina can mow nine lawns or trim twelve trees in eight hours. Based on the information in the table, which of the following is true? A) Irina has an absolute advantage in moving lawns B) Irina has an absolute advantage in trimming trees C) Irina has a comparative advantage in trimming trees D) Simone has an absolute advantage in trimming trees and mowing lawns E) Simone has a comparative advantage in trimming tress and mowing lawns

D) Simone has an absolute advantage in trimming trees and mowing lawns.

Use the table to answer the question below. 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 and there will be a surplus in the market B) The market does not clear because the price is lower than the equilibrium price and there will be a shortage in the market C) The market clears because the buyers and sellers are in agreement on the price D) The market does not clear because the price is high than the equilibrium and these will be a surplus in the market E) The market does not clear because the price is higher than the equilibrium price and there will be a shortage in the market

D) The market does not clear because the price is high than the equilibrium and these will be a surplus in the market

Two nations sign a trade agreement expecting to enjoy mutual gains from the trade of a certain good. How will this event likely affect the supply of the good in the two nations? A) This event will likely cause a decrease in the quantity supplied of the good in both nations. B) This event will likely cause an increase in the quantity supplied of the good in both nations. C) This event will likely cause a decrease in the supply of the good in both nations. D) This event will likely cause an increase in the supply of the good in both nations. E) This event will likely have no effect on the good in either nation.

D)This event will likely cause an increase in the supply of the good in both nations.

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

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

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

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

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

E) Resources have alternative uses

Which of the following is not a scarce resource? A) Land B) Labor C) Capital D) Entrepreneurship E) Stocks

E) Stocks

Assume household income has fallen dramatically in Country X and the cost of construction materials for building new houses has increased. How will these changes affect the equilibrium price and equilibrium quantity for new houses? A) The equilibrium price will increase, and the equilibrium quantity will decrease. B) The equilibrium price will decrease, and the equilibrium quantity will decrease. C)The equilibrium price will decrease, and the equilibrium quantity will increase. D) The equilibrium price will decrease, and the equilibrium quantity will be indeterminate. E) The equilibrium price will be indeterminate, and the equilibrium quantity will decrease.

E) The equilibrium price will be indeterminate, and the equilibrium quantity will decrease.

Include correctly labeled diagrams, if useful or required, in explaining your answers. A correctly labeled diagram must have all axes and curves clearly labeled and must show directional changes. If the question prompts you to "Calculate," you must show how you arrived at your final answer. Assume gadgets are sold in a competitive market, the equilibrium price is $6, and the equilibrium quantity is 500 units. (a) Using the numerical values above, draw a correctly labeled graph of the market for gadgets and show each of the following. (i) The equilibrium price (ii) The equilibrium quantity (b) At a price of $8 per unit, will there be a surplus or a shortage in the market? Explain. (c) Assume gadgets now become more popular. On your graph in part (a), show the effect of the increase in gadgets' popularity on the equilibrium price and quantity of gadgets. (d) Assume instead there is an increase in the price of tin, a major input in producing gadgets. What will be the effect of an increase in the price of tin on the market for gadgets? (e) If both changes in part (c) and part (d) occurred simultaneously, will the equilibrium quantity of gadgets increase, decrease, remain unchanged, or be indeterminate? Explain.

a) (supply and demand graph labeled axis' and equilibrium) b) Surplus, because as the price per unit goes above the price equilibrium the quantity supplied will be greater than the quantity demanded. c) (demand line increases (up and to the right)) d) The effect of an increase in the price of tin on the market for gadgets is a decrease in quantity demand of gadgets. e) Indeterminate, because the two changes are in different directions we do not know which change had a greater impact on the market.

Include correctly labeled diagrams, if useful or required, in explaining your answers. A correctly labeled diagram must have all axes and curves clearly labeled and must show directional changes. If the question prompts you to "Calculate," you must show how you arrived at your final answer. Zeetopia and Freshland are two small tropical islands that use the same amounts of resources to produce mangoes and coconuts as shown in the table below. Coconuts (in tons) Mangoes (in tons) Zeetopia 50 60 Freshland 50 30 (a) Which island has an absolute advantage in producing coconuts? Explain. (b) Which island has a comparative advantage in producing coconuts? Explain. (c) Assume Zeetopia and Freshland decide to specialize according to their comparative advantages and 1 ton of coconuts is exchanged for 1 ton of mangoes. Are specialization and trade under these terms beneficial to both Zeetopia and Freshland? Explain. (d) Assume the two islands experience constant opportunity costs in the production of the two products. Draw a correctly labeled graph illustrating Zeetopia's and Freshland's production possibilities, showing coconuts on the horizontal axis and mangoes on the vertical axis. Plot the numerical values from the table above on your graph. (e) On your graph in part (d), show a combination of coconuts and mangoes, labeled as point X that is unattainable for Freshland but feasible and inefficient for Zeetopia.

a) Neither island has an absolute advantage in producing coconuts, because 50 = 50. b) Freshland has a comparative advantage in producing coconuts, because they can produce coconuts at a lower opportunity cost. c) Yes, because both islands can trade their specialized item for more than it would cost them to produce it them selves. d) (graph shares point on 50 coconuts; freshland hits 30 on mangos; zeetopia hits 60 on mangos; straight lines; labeled axis') e) ("X" somewhere between the two lines)