Unit 1 AP Exam

Q54 Wages as a determinant of supply If the wage rate of workers producing a good decreases, then which of the following will most likely occur?

A The demand curve will shift to the right. B The supply of the good will increase.✅ C The quantity supplied of the good will decrease. D Demand for the good will increase E Quantity demanded for the good will decrease.

Q44 Scarcity Which of the following describes scarcity?

A Wants are limited. B Wants exceed resources.✅ C Resources are unlimited. D Resources are fully employed. E Resources are allocated efficiently.

Q30 On PPC, more of one good means less of other good When an economy producing two goods is operating efficiently and at full employment, increasing the production of one good will result in

A an inward shift of the production possibilities curve B an outward shift of the production possibilities curve C a decrease in the amount of the other good that can be produced✅ D an increase in the costs of both goods E an increase in the amount of resources available

Q1 Any point inside a production possibilities curve

A better than points on the production possibilities curve B allocatively efficient but technologically inefficient C associated with inefficient use or unemployment of some resources✅ D associated with movements along the production possibilities curve E associated with constant opportunity costs

Q24 Interpreting shape of PPC - good X and Y If producing each additional unit of good X required giving up ever-increasing amounts of good Y, the production possibilities curve between X and Y would be

A bowed outward✅ B bowed inward C a straight line D horizontal E upward sloping

Q55 Wants exceeds capacity, thus scarcity exists Scarcity exists because

A human wants exceed the productive capacity of the economy✅ B supplies of land and other natural resources are unlimited C physical capital does not depreciate D population and labor force growth are slowing E innovation causes unemployment

Q31 Opportunity cost irrelevant if unlimited resources The concept of opportunity cost would no longer be relevant if

A poverty in an economy no longer existed B the supply of all resources were unlimited✅ C resources were allocated efficiently D real wages were flexible E all current incomes were invested in technological research

Q6 Concave PPC shows increasing opportunity cost A production possibilities curve that is concave to the origin (bowed out) implies that as more of a good is produced, the opportunity cost

A remains constant B decreases C decreases at first and then increases D increases✅ E increases at first and then decreases

Q51 The economic problem The fundamental economic problem is

A rising interest rates B the scarcity of resources✅ C unemployment and inflation D the tax burden on households E the unequal distribution of income

Q32 Opportunity cost is value of next best option The opportunity cost of an activity is

A the amount of time spent on the activity B the value of the benefit received from performing the activity C the value of the forgone benefit of the next best alternative✅ D zero if the activity offered no benefits E the sum of benefits from all the sacrificed alternatives

Q7 Concepts illustrated using PPC Which of the following concepts can be illustrated using the production possibilities curve? I. Choice II. Scarcity III. Price level IV. Opportunity cost

I, II, and IV only

Q3 Change in Supply for computers A leftward shift of the supply curve for computers could be caused by which of the following in the short run?

A A decrease in the number of computer manufacturers✅ B A decease in taxes on computer manufacturers C A decrease in the price of computers D A decrease in the price of components used to assemble computers E An increase in the price of mobile devices, a substitute good Correct. One of the determinants of supply is the number of sellers. With fewer firms in the market, the supply will decrease, and the supply curve will shift to the left

Q53 Trade off All societies face a trade-off for every decision for which of the following reasons?

A A decision entails zero opportunity cost. B Resources are scarce. ✅ C Some resources are always unemployed. D Resources have no alternative uses. E Resources are not allocated efficiently.

Q23 Increased employment moves economy to PPC An economy is operating at a point inside its production possibilities curve (PPC PPC ). Which of the following will most likely cause the economy to move toward the current PPC PPC in the short run?

A A decrease in government spending B A decrease in inflation C An increase in human capital D An increase in employment✅ E An increase in imports

Q8 Current and Future PPCs Assume an economy produces two goods, capital goods and consumer goods. If the production of capital goods increases in the current period, which of the following will occur for the current and future production possibilities curve (PPC) ( PPC ) for consumer goods and capital goods?

A A movement along the current PPC and a leftward shift of the future PPC B A movement along the current PPC and a rightward shift of the future PPC✅ C A rightward shift of the current PPC and a leftward shift of the future PPC D A rightward shift of the current PPC and a rightward shift of the future PPC E A movement along the current PPC with no shift of the future PPC

Q47 Shrinking labor force shifts PPC inward Which of the following would shift a country's production possibilities curve inward?

A A reduction in the country's inflation rate B A reduction in the country's real interest rate C A reduction in the size of the country's labor force✅ D An increase in the typical retirement age in the country E An increase in the country's cyclical unemployment rate

Q16 Factors of production Which of the following is an example of a factor of production?

A A want B A bank C A bond D Capital✅ E Stock

Q29 Movement along the demand curve Which of the following will cause a movement along the demand curve for chicken, a normal good, resulting in an increase in the quantity demanded?

A An increase in consumers' income B An increase in the price of fish, a substitute good C An increase in the price of barbecue sauce, a complementary good D A decrease in the price of chicken✅ E A decrease in the number of consumers of chicken

Q4 Changes in market equilibrium Which of the following changes would result in an indeterminate change in the equilibrium price in a competitive market?

A An increase in demand and a decrease in supply B An increase in demand and an increase in supply✅ C A decrease in demand and an increase in supply D A decrease in demand with no change in supply E A decrease in supply with no change in demand

Q59 Why a decrease in PPC - decrease in human capital Which of the following would best explain an inward shift of the production possibilities curve?

A An increase in the labor-force participation rate B An increase in the rate of savings C A decrease in the quantity of inputs required to produce a unit of output D A decrease in the quality of human capital✅ E A decrease in the government's budget deficit that leads to lower real interest rates

Q52 The law of supply Which of the following describes the law of supply?

A An increase in the price of a good will decrease the quantity demanded. B The price of a good will increase if production input costs increase. C An increase in taxes will decrease the supply of a good. D An increase in the number of sellers will increase the supply of a good. E An increase in the price of a good will increase the quantity supplied. ✅

Q27 Most fundamental issue economics addresses Which of the following is the most fundamental issue that economics addresses?

A Choice of appropriate technology B Reduction of unemployment C Reduction of budget deficit D Promotion of privatization E Use of scarce resources✅

Q5 Combo of goods outside the PPC If a certain combination of goods or services lies outside the production possibilities curve of an economy, which of the following is true?

A Effective trade barriers have reduced foreign imports into the economy. B New technology is being used in production. C Resources are not available to achieve that combination of goods or services.✅ D Resources are not being used efficiently to achieve that combination of goods or services. E Resources are being used at a more rapid rate than they were in the past.

Q13 Effect of changes in input cost on equilibrium If there is a decrease in the price of the coffee beans used to make brewed coffee, how will this affect the equilibrium price and quantity of brewed coffee?

A Equilibrium price will decrease and equilibrium quantity will increase✅ B Equilibrium price will decrease and equilibrium quantity will not change C Equilibrium price will decrease and equilibrium quantity will decrease D Equilibrium price will increase and equilibrium quantity will decrease E Equilibrium price will increase and equilibrium quantity will not change

Q19 Improvement in production tech and increase in D If the production technology of a good improves and at the same time the number of consumers willing and able to buy the good in the market increases, which of the following will definitely occur?

A Equilibrium price will increase. B Equilibrium price will decrease. C Equilibrium quantity will increase.✅ D Equilibrium quantity will decrease. E Equilibrium quantity will remain the same.

Q50 Tariff increases domestic output of commodity Y To protect high-cost domestic producers, a country imposes a tariff on an imported commodity, Y. Which of the following is most likely to occur in the short run? A decrease in domestic production of Y An increase in domestic production of Y An increase in foreign output of Y

A I only B II only ✅ C III only D I and III only E II and III only

Q58 Which is true for economy operating inside its PPC For an economy that is operating inside its production possibilities curve, which of the following is true?

A It can increase the production of both goods.✅ B Its population is growing faster than the economy's ability to increase production. C It is using all available resources efficiently. D It cannot move to a point on the production possibilities curve with available technology. E It lacks the resources to increase production beyond its current output

Q17 Fully employed resources for economy on PPF Which of the following is always true of an economy operating on its production possibilities frontier?

A Its resources are fully employed.✅ B It is allocatively efficient. C It cannot trade with other nations because it is the most efficient producer of tradeable goods. D It will necessarily operate on the same frontier the following year. E It must be a command economy.

Q56 What happens when price less than equilibrium Which of the following will occur in a competitive market when the price of a good is less than the equilibrium price?

A Price will decrease to eliminate the surplus and restore equilibrium. B Price will decrease to eliminate the shortage and restore equilibrium. C Price will increase to eliminate the surplus and restore equilibrium. D Price will increase to eliminate the shortage and restore equilibrium.✅ E Price will remain constant, because supply will increase to eliminate the