AP Econ Fall Final Review Unit 1

D

A normative statement is one that: A) is based on the law of averages. B) applies only to microeconomics. C) applies only to macroeconomics. D) is based on value judgments.

C

A positive statement is concerned with: A) some goal that is desirable to society. B) what should be. C) what is. D) the formulation of economic policy.

D

A positive statement is one which is: A) derived by induction. B) derived by deduction. C) subjective and is based on a value judgment. D) objective and is based on facts.

A

A production possibilities curve illustrates: A) scarcity. B) market prices. C) consumer preferences. D) the distribution of income.

C

A production possibilities curve shows: A) that resources are unlimited. B) that people prefer one of the goods more than the other. C) the maximum amounts of two goods that can be produced assuming the full and efficient use of available resources. D) combinations of capital and labor necessary to produce specific levels of output.

D

Any point inside the production possibilities curve indicates: A) the realization of allocative efficiency. B) that resources are imperfectly shiftable among alternative uses. C) the presence of inflationary pressures. D) that more output could be produced with available resources.

C

Assume an economy is operating at some point on its production possibilities curve, which shows civilian and military goods. If the output of military goods is increased, the output of civilian goods: A) will remain unchanged. B) may be either increased or decreased. C) must be decreased. D) must also be increased.

A

Because of their scarcity, the efficient use of resources is: A) an important issue in all economies. B) an important issue only in centrally planned economies. C) an important issue only in market economies. D) not an important issue.

B

Ben says that "An increase in the tax on beer will raise its price." Holly argues that "Taxes should be increased on beer because college students drink too much." We can conclude that: A) Ben's statement is normative, but Holly's is positive. B) Holly's statement is normative, but Ben's is positive. C) Both statements are normative. D) Both statements are positive.

B

Consumers might leave a fast-food restaurant without being served because: A) they are misinformed about the marginal cost and marginal benefits of the food being served. B) they conclude that the marginal cost (monetary plus time costs) exceeds the marginal benefit. C) the environment is not conducive to a rational choice. D) the lines waiting for service are not of equal length.

D

Economic resources are also called: A) free gifts of nature. B) consumption goods. C) units of money capital. D) factors of production.

B

Economics may best be defined as the: B) social science concerned with the efficient use of scarce resources to achieve maximum satisfaction of economic wants.

C

Households and businesses are: A) both buyers in the resource market. B) both sellers in the product market. C) sellers in the resource and product markets respectively. D) sellers in the product and resource markets respectively.

D

Ideally, value judgments are involved at the: A) levels of facts, theory, and policy. B) levels of facts and theory only. C) level of facts only. D) level of policy only.

A

In constructing models, economists: A) make simplifying assumptions. B) include all available information. C) must use mathematical equations. D) attempt to duplicate the real world.

A

In deciding whether to study for an economics quiz or go to a movie, one is confronted by the idea(s) of: A) scarcity and opportunity costs. B) money and real capital. C) complementary economic goals. D) full production.

C

In terms of the circular flow diagram, businesses obtain revenue through the _____ market and make expenditures in the _____ market. A) product; financial B) resource; product C) product; resource D) capital; product

A

In the circular flow model: A) households sell resources to firms. B) households receive income through the product market. C) households spend income in the resource market. D) businesses neither buy nor sell resources.

C

In the resource market: A) businesses borrow financial capital from households. B) businesses sell services to households. C) households sell resources to businesses. D) firms sell raw materials to households.

B

In the simple circular flow model: A) households are buyers of resources. B) businesses are sellers of final products. C) households are sellers of final products. D) there are real flows of goods, services, and resources, but not money flows.

Learning economics:

Learning economics: D) helps students improve analytical skills that are in great demand in the workplace.

A

Macroeconomics approaches the study of economics from the viewpoint of: A) the entire economy. B) governmental units. C) the operation of specific product and resource markets. D) individual firms.

B

Macroeconomics can best be described as the: A) analysis of how a consumer tries to spend income. B) study of the large aggregates of the economy or the economy as a whole. C) analysis of how firms attempt to maximize their profits. D) study of how supply and demand determine prices in individual markets.

B

Microeconomics is concerned with: A) the aggregate or total levels of income, employment, and output. B) a detailed examination of specific economic units that make up the economic system. C) positive economics, but not normative economics. D) the establishing of an overall view of the operation of the economic system.

C

Microeconomics: A) is the basis for the "after this, therefore because of this"fallacy. B) is not concerned with details, but only with the overall big picture of the economy. C) is concerned with individual economic units and specific markets. D) describes the aggregate flows of output and income.

A

Money is not an economic resource because: A) money, as such, is not productive. B) idle money balances do not earn interest income. C) the terms of trade can be determined in nonmonetary terms. D) money is not a free gift of nature.

D

Refer to the above diagram. Arrows (1) and (2) represent: A) goods and resources respectively. B) money incomes and output respectively. C) output and money incomes respectively. D) resources and goods respectively.

B

Refer to the above diagram. Arrows (1) and (3) are associated with: A) the money market. B) the resource market. C) the product market. D) international trade.

B

Refer to the above diagram. Arrows (3) and (4) represent: A) goods and services respectively. B) incomes and consumer expenditures respectively. C) resources and goods respectively. D) consumer expenditures and income respectively.

A

Refer to the above diagram. Flow (1) represents: A) wage, rent, interest, and profit income. B) land, labor, capital, and entrepreneurial ability. C) goods and services. D) consumer expenditures.

B

Refer to the above diagram. Flow (2) represents: A) wage, rent, interest, and profit income. B) land, labor, capital, and entrepreneurial ability. C) goods and services. D) consumer expenditures.

C

Refer to the above diagram. Flow (3) represents: A) wage, rent, interest, and profit income. B) land, labor, capital, and entrepreneurial ability. C) goods and services. D) consumer expenditures.

D

Refer to the above diagram. Flow (4) represents: A) wage, rent, interest, and profit income. B) land, labor, capital, and entrepreneurial ability. C) goods and services. D) consumer expenditures.

D

Refer to the above diagram. Other things equal, this economy will achieve the most rapid rate of growth if: A) the ratio of capital to consumer goods is minimized. B) it chooses point C. C) it chooses point B. D) it chooses point A.

D

Refer to the above diagram. This economy will experience unemployment if it produces at point: A) A. B) B. C) C. D) D.

C

Refer to the above table. A total output of 3 units of capital goods and 4 units of consumer goods: A) is irrelevant because the economy is capable of producing a larger total output. B) will result in the maximum rate of growth available to this economy. C) would involve an inefficient use of the economy's scarce resources. D) is unobtainable in this economy.

A

Studying economics: A) helps one become a better-informed citizen and voter.

C

The achieving of complete economic freedom is most likely to conflict with the goal of: A) price-level stability. B) economic growth. C) an equitable distribution of income. D) economic efficiency.

A

The basic purpose of the other-things-equal assumption is to: A) allow one to reason about the relationship between variables X and Y without the intrusion of variable Z. B) allow one to focus upon micro variables by ignoring macro variables. C) allow one to focus upon macro variables by ignoring micro variables. D) determine whether X causes Y or vice versa.

B

The concept of opportunity cost: A) is irrelevant in socialistic economies because of central planning. B) suggests that the use of resources in any particular line of production means that alternative outputs must be forgone. C) is irrelevant if the production possibilities curve is shifting to the right. D) suggests that insatiable wants can be fulfilled.

B

The economic perspective entails: A) irrational behavior by individuals and institutions. B) a comparison of marginal benefits and marginal costs in decision making. C) short-term but not long-term thinking. D) rejection of the scientific method.

C

The economic perspective refers to: A) macroeconomic phenomena, but not microeconomic phenomena. B) microeconomic phenomena, but not macroeconomic phenomena. C) the making of rational decisions in a context of marginal costs and marginal benefits. D) unlimited resources in a context of limited economic wants.

A

The economic perspective used in customer decision making at fast-food restaurants is reflected in: A) customers selecting the shortest line. B) decisions for which marginal costs exceed marginal benefits. C) all customer lines tending to be of different length. D) irrational purchasing of high-fat-content food.

A

The law of increasing opportunity costs exists because: A) resources are not equally efficient in producing various goods. B) the value of the dollar has diminished historically because of persistent inflation. C) wage rates invariably rise as the economy approaches full employment. D) consumers tend to value any good more highly when they have little of it.

D

The money payments made to owners of land, labor, capital, and entrepreneurial ability are: A) interest, wages, rent, and profits respectively. B) rent, wages, dividends, and interest respectively. C) rent, profits, wages, and interest respectively. D) rent, wages, interest, and profits respectively.

A

The problems of aggregate inflation and unemployment are: A) major topics of macroeconomics. B) not relevant to the U.S. economy. C) major topics of microeconomics. D) peculiar to command economies.

C

The process of producing and accumulating capital goods is called: A) money capital. B) depreciation. C) investment. D) consumption.

C

The production possibilities curve: A) shows all of those levels of production that are consistent with a stable price level. B) indicates that any combination of goods lying outside the curve is economically inefficient. C) is a frontier between all combinations of two goods that can be produced and those combinations that cannot be produced. D) shows all of those combinations of two goods that are most preferred by society.

B

The scarcity problem: A) persists only because countries have failed to achieve continuous full employment. B) persists because economic wants exceed available productive resources. C) has been solved in all industrialized nations. D) has been eliminated in affluent societies such as the United States and Canada.

C

The study of economics is primarily concerned with: C) choices that are made in seeking to use scarce resources efficiently..

C

The term "other things equal" means that: A) the associated statement is normative. B) many variables affect the variable under consideration. C) a number of relevant variables are assumed to be constant. D) when variable X increases so does related variable Y.

C

The two basic markets shown by the simple circular flow model are: A) capital goods and consumer goods. B) free and controlled. C) product and resource. D) household and business.

D

Unemployment and/or productive inefficiencies: A) cause the production possibilities curve to shift outward. B) can exist at any point on a production possibilities curve. C) are both illustrated by a point outside the production possibilities curve. D) are both illustrated by a point inside the production possibilities curve.

C

When an economy is operating with maximum efficiency, the production of more of commodity A will mean the production of less of commodity B because: A) of the law of increasing opportunity costs. B) economic wants are insatiable. C) resources are limited. D) resources are specialized and only imperfectly shiftable.

D

Which of the following factors does not lead to economic growth? A) Increase in resource supply B) Technology advances C) Specialization in capital goods D) Specialization in consumer goods

D

Which of the following is a land resource? A) a farmer B) an oil drilling rig C) a machine for detecting earthquakes D) natural gas

C

Which of the following is a limitation of the simple circular flow model? A) product markets are ignored. B) resource markets are ignored. C) The determination of product and resource prices is not explained. D) households are included, but not businesses.

A

Which of the following is a macroeconomic statement? A) The gross profits of all U.S. businesses were $182 billion last year. B) The price of beef declined by 3 percent last year. C) General Motors' profits increased last year. D) The productivity of steel workers increased by 1 percent last year.

B

Which of the following is real capital? A) a pair of stockings B) a construction crane C) a savings account D) a share of IBM stock

B

Which of the following statements is true? A) The process of deriving economic theories and principles is known as policy economics. B) Full employment, price-level stability, and economic growth are widely accepted macroeconomics goals in the United States. C) Normative economics deals with "what is," whereas positive economics deals with "what ought to be." D) There can be too little of a good thing, but never too much of a good thing.

B

"Economics is concerned with using scarce productive resources efficiently in attempting to satisfy society's economic wants." This statement is: A) positive, but incorrect. B) positive and correct. C) normative, but incorrect. D) normative and correct.

A

Assume that a change in government policy results in greater production of both consumer goods and investment goods. We can conclude that: A) the economy was suffering from unemployment and/or the inefficient use of resources before the policy change. B) the economy's production possibilities curve has been shifted to the left as a result of the policy decision. C) this economy's production possibilities curve is convex (bowed inward) to the origin. D) the law of increasing opportunity costs does not apply in this society.

C

At fast-food restaurants: A) consumers enjoy complete and accurate information. B) decisions are usually made by trial and error. C) decisions entail comparisons of marginal costs and marginal benefits. D) benefits always exceed costs.

C

Economic models: A) are of limited use because they cannot be tested empirically. B) are limited to variables that are directly related to one another. C) emphasize basic economic relationships by abstracting from the complexities of the real world. D) are unrealistic and therefore of no practical consequence.

B

If a reduction in the unemployment rate is always accompanied by a reduction in income inequality, then: A) full employment and greater income equality are conflicting goals. B) full employment and greater income equality are compatible goals. C) reduced income inequality is a more important goal than is achieving full employment. D) achieving full employment is a more important goal than reducing income inequality.

C

In terms of the circular flow diagram, households make expenditures in the _____ market and receive income through the _____ market. A) product; financial B) resource; product C) product; resource D) capital; product

D

Most of the disagreement among economists involves: A) facts. B) principles. C) positive statements. D) normative statements.

B

Normative statements are concerned with: A) facts and theories. B) what ought to be. C) what is. D) rational choice involving costs and benefits.

D

Opportunity cost is best defined as: A) the monetary price of any productive resource. B) the amount of labor that must be used to produce one unit of any product. C) the ratio of the prices of imported goods to the prices of exported goods. D) the amount of one product that must be given up to produce one more unit of another product.

A

Refer to the above table. As compared to production alternative D, the choice of alternative C would: A) tend to generate a more rapid growth rate. B) be unattainable. C) entail unemployment. D) tend to generate a slower growth rate.

B

Refer to the above table. For these data the law of increasing opportunity costs is reflected in the fact that: A) the amount of consumer goods that must be sacrificed to get more capital goods diminishes beyond a point. B) larger and larger amounts of capital goods must be sacrificed to get additional units of consumer goods. C) the production possibilities data would graph as a straight downsloping line. D) the economy's resources are presumed to be scarce.

A

Refer to the above table. For this economy to produce a total output of 3 units of capital goods and 17 units of consumer goods it must: A) achieve economic growth. B) use its resources more efficiently than the data in the table now indicate. C) allocate its available resources most efficiently among alternative uses. D) achieve the full employment of available resources.

A

Refer to the above tables. If South Cantina is producing at production alternative D, the opportunity cost of the third unit of capital good will be: A) 6 units of consumer goods B) 4 units of consumer goods C) 3 units of consumer goods D) 2 units of consumer goods

B

The four factors of production are: A) land, labor, capital, and money B) land, labor, capital, and entrepreneurial ability C) labor, capital, technology, and entrepreneurial ability D) labor, capital, entrepreneurial ability, and money

C

The idea of opportunity cost: A) applies to consumers, but not to businesses. B) applies to businesses, but not to consumers. C) is relevant to economies of all ideological persuasions. D) would disappear if we were able to eliminate poverty.

A

The law of increasing opportunity costs states that: A) if society wants to produce more of a particular good, it must sacrifice larger and larger amounts of other goods to do so. B) the sum of the costs of producing a particular good cannot rise above the current market price of that good. C) if the sum of the costs of producing a particular good rises by a specified percent, the price of that good must rise by a greater relative amount. D) if the prices of all the resources used to produce goods increase, the cost of producing any particular good will increase at the same rate.

B

The main function of the entrepreneur is to: A) make routine pricing decisions. B) innovate. C) purchase capital. D) create market demand.

C

The production possibilities curve illustrates the basic principle that: A) the production of more of any one good will in time require smaller and smaller sacrifices of other goods. B) an economy will automatically obtain full employment of its resources. C) if all the resources of an economy are in use, more of one good can be produced only if less of another good is produced. D) an economy's capacity to produce increases in proportion to its population size.

C

The simple circular flow model shows that: A) households are on the buying side of both product and resource markets. B) businesses are on the selling side of both product and resource markets. C) households are on the selling side of the resource market and on the buying side of the product market. D) businesses are on the buying side of the product market and on the selling side of the resource market.

C

The term "ceteris paribus" means: A) that if event A precedes event B, A has caused B. B) that economics deals with facts, not values. C) other things equal. D) prosperity inevitably follows recession.

D

Which of the following is a capital resource? A) a computer programmer B) a corporate bond issued by a computer manufacturer C) silicone (sand) used to make computer chips D) a piece of software used by a firm

A

Which of the following is a labor resource? A) a computer programmer B) a computer C) silicon (sand) used to make computer chips D) a piece of software used by a firm

C

Which of the following is a land resource? A) a computer programmer B) a computer C) silicon (sand) used to make computer chips D) a piece of software used by a firm

C

Which of the following is a microeconomic statement? A) The real domestic output increased by 2.5 percent last year. B) Unemployment was 6.8 percent of the labor force last year. C) The price of personal computers declined last year. D) The general price level increased by 4 percent last year

C

Which of the following is a normative statement? A) The temperature is high today. B) The humidity is high today. C) It is too hot to play tennis today. D) It will cool off later this evening.

C

Which of the following is a positive statement? A) The humidity is too high today. B) It is too hot to jog today. C) The temperature is 92 degrees today. D) I enjoy summer evenings when it cools off.

C

Which of the following is an economic explanation for why most college-aged movie stars do not attend college. A) they are too dumb to get into college B) they would find college life boring C) the opportunity cost in terms of reduced income is too great D) they cannot afford the room, board, and tuition fees most colleges charge.

B

Which of the following is associated with macroeconomics? A) an examination of the incomes of Harvard Business School graduates B) an empirical investigation of the general price level and unemployment rates since 1990 C) a study of the trend of pecan prices since the Second World War D) a case study of pricing and production in the textbook industry

D

Which of the following lists includes only capital resources (and therefore no labor or land resources)? A) an ice arena; a professional hockey player; hockey uniforms. B) the owner of a new startup firm; a chemistry lab; a researcher. C) a hydroelectric dam; water behind the dam; power lines. D) autos owned by a car rental firm; computers at the car rental agency; the vans that shuffle rental customers to and from the airport.

B

Which of the following might shift a nation's production possibilities curve inward? A) improved technology. B) devastation by war. C) improved health care. D) a business downturn in which unemployment temporarily rises.

C

Which of the following statements pertains to macroeconomics? A) Because the minimum wage was raised, Mrs. Olsen decided to enter the labor force. B) A decline in the price of soybeans caused farmer Wanek to plant more land in wheat. C) The national productivity rate grew by 2.7 percent last year. D) The Pumpkin Center State Bank increased its interest rate on consumer loans by 1 percentage point.

B

Which of the following will not produce an outward shift of the production possibilities curve? A) an up grading of the quality of a nation's human resources B) the reduction of unemployment C) an increase in the quantity of a society's labor force D) the improvement of a society's technological knowledge

C

With respect to the basic economic goals of society, for example, economic growth, full employment, economic efficiency, price level stability, economic freedom, distributional equity, and economic security, it can be said that: A) all are accepted and assigned similar priorities in every industrialized society. B) all are precisely measurable. C) some goals are complementary and others are conflicting. D) all are conflicting goals.