AP Econ Practice Test
The market system's answer to the fundamental question "Who will get the goods and services?" is essentially:
"who is willing and able to pay for them."
Refer to the diagram. Points A, B, C, D, and E.
Combination of bicycles and computers that society can produce by using its resources efficiently. (since they're all on the curve=efficient)
In the past few years, the demand for donuts has greatly increased. This increase in demand might best be explained by:
A change in buyer tastes.
A shift to the right in the demand curve for product A can be most reasonably explained by saying that:
Consumer preferences have changed in favor of A so that they now want to buy more at each possible price.
The term dollar votes in a market system means:
Consumers "vote" for certain products to be produced by how they spend their incomes.
Refer to the diagram. Other things equal, this economy will shift is production possibilities curve o the most if
It chooses point A. (more capital goods)
The issue of inflation, unemployment, and business cycles are:
Major topics of economics.
Which of the following is a distinguishing feature of a laissez-faire capitalism?
Minimal government intervention.
Refer to the diagram. The combination of computers and bicycles shown by point G is:
Unattainable given currently available resources and technology.
Normative statements are concerned primarily with
What ought to be.
In the simple circular flow model
business are sellers of final products.
Blu-ray players and Blu-ray discs are:
complementary goods.
The production possibilities curve
is a frontier between all combinations of two goods that can be produced and those combinations that cannot be produced.
The four factors of production are:
land, labor, capital, and entrepreneurial ability
Refer to the diagram. Flow 1 represents.
wage, rent, interest, and profit income
Which of the following would not be a capital resource by economists?
A van used by a mother to transport the family around.
In the following question you are asked to determine, other things equal, the effects of a given change in a determinant of demand or supply for product X upon (1) the demand (D) for, or supply (S) of, X; (2) the equilibrium price (P) of X; and (3) the equilibrium quantity (Q) of X. An improvement in the technology used to produce X will.
Decreases S, increase P, and decrease Q.
On a production possibilities curve, the single optimal or best combination of output for any society
Depends upon the preferences of society.
If the production possibilities curve is a straight line:
Economic resources are perfectly sustainable between the production of the two goods.
The competitive market system
Encourages innovation because successful innovators are rewarded with economic profits.
The individual who brings together economic resources and assume the risk of business ventures in a capitalist economy is called the
Entrepreneur.
Data from the registrar's office at Gigantic State University indicate that over the past twenty years tuition and enrollment have both increased. From this information we can conclude that.
Factors such as school-age population, incomes, and preferences for education have increased over the 20-year period.
Refer to the diagram. A surplus of 160 units would be encountered if the price was:
$1.60
Refer to the diagram. A shortage of 160 units would be encountered if the price was:
%0.50
The basic purpose of the other-things-equal assumption is to:
Allow one to reason about the relationship between variables X and Y without the intrusion of variable Z. (ceteris paribus)
A recent study found that an increase in the federal tax on beer (and thus an increase in the price of beer) would reduce the demand for marijuana. We can conclude that:
Beer and marijuana are complimentary goods.
An economist for a bicycle company predicts that, other things equal, a rise in consumer incomes will increase the demand for bicycles. This prediction is based on the assumption that:
Bicycles are normal goods.
Refer to the production possibilities curve. At the onset of the Second World War, the Soviet Union was already at full employment. Its economic adjustment from peacetime to wartime can best be described by the movement from point:
C to B. Sacrificed civilian goods to produce more war goods.
Which of the following is a distinguishing feature of a command system?
Central planning.
An increase in the price of a product that is a compliment to X will
Decrease D, Decrease P, and Decrease Q.
Refer to the graphs. Assume that pizza is measured in slices and beer in pints. In which of the graphs is the opportunity cost of a pint of beer equal to one slice of pizza?
Graph D. Because 10 for 10 makes it equal.
The simple circular flow models shows that:
Households are on the selling side of the resource market and on the buying side of the product market.
The production possibilities curve illustrates the basic principle that
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.
The law of increasing opportunity cost states that
If society wants to produce more of a particular good, it must sacrifice larger and larger amounts of another good to do so.
Which of the following statements is correct?
If supply increases and demand decreases, equilibrium price will fall.
An increase in the price of a product that is a close for X will.
Increase D, increase P, and increase Q.
College students living off-campus frequently consume large amounts of ramen noodles and boxed macaroni and cheese. When they finish school and start careers, their consumption of both goods frequently declines. This suggests that ramen noodles and boxed macaroni and cheese are
Inferior goods.
Refer to the diagram. A decrease in quantity demanded is depicted by a:
Move from point y to point x.
Refer to the diagram. An increase in quantity supplied is depicted by a:
Move from point y to point x.
Assume an economy is incurring unemployment. The effect of resolving this problem will be to:
Move the level of actual output closer to the economy's production possibilities curv.
Joe sold gold coins for $1000 that he bought a year ago for $1000. He says, "At least I didn't lose any money on my financial investment." His economist friend points out that in effect he did lose money, because he could have received a 3 percent return on the $1000 if he had bought a bank certificate of deposit instead of the coins. The economist's analysis in this case incorporates the idea of what?
Opportunity costs.
Scarcity
Persist because economic wants exceed available resources.
The demand curve shows the relationship between:
Price and quantity demanded.
Suppose that tacos and pizza are substitutes, and that soda and pizza are complements. We would expect an increase in the price of pizza to:
Reduce the demand for soda and increase the demand for tacos.
Which of the following will not produce an outward shift of the production possibilities curve
Reducing unemployment
Refer to the diagram. Arrows (1) and (2) represent
Resources ans goods, respectively.
Refer to the diagram. A decrease in demand is depicted by a:
Shift from D2 to D1.
Refer to the diagram. A decrease in supply is depicted by a:
Shift from S2 to S1.
Which of the following is not correct? A typical production possibilities curve
Specifies how much of each product a society will want to produce. (does not specify) SHOWS POSSIBILITIES
In 2007, the price of oil increased, which in turn caused the price of natural gas to rise. This can best be explained by saying that oil and natural gas are:
Substitute goods, and the higher the price for oil increased the demand for natural gas.
Other things equal, if the price of a key resource used to product product X falls, the
Supply curve of product X will shift to the right.
Opportunity cost coexists because
The decision to engage in one activity means forgoing on some other activity.
A nation's production possibilities curve might shift to the left (inward) as a result of.
The depletion of its soil fertility die to over-planting and over-gazing.
Refer to the diagram, in which S1 and D1 represent the original supply and demand curves and S2 and D2 the new curves. In this market:
The development of more efficient machinery for producing this commodity.
A fundamental difference between the command system and laissez-faire capitalism is that, in command systems:
The division of output is decided by central planning rather than by individuals operating freely through markets.
Which of the following would most likely increase the demand for gasoline?
The expectation by consumers that gasoline prices will be higher in the future.
What is a major opportunity cost of going to college on a full-time basis?
The forgone income that would have been earned working in a full-time job.
Which of the following is a microeconomic statement?
The price of smartphones declined 2.8% last year.
If there is a shortage of product X, and the price is free to change:
The price of the product will rise.
Which of the following is a positive statement?
The temperature is 92 degrees today. (can be proven true or false)
In which of the following statements are the terms "demand" and "quantity demanded" used correctly?
When the price of ice cream rose, the quantity demanded of ice cream fell, and the demand for ice cream toppings fell.
Refer to the diagram. If society is currently producing 9 units of bicycles and 4 units of computers and it now decides to increase computer output to 6, the cost:
Will be 4 units of bicycles.
If two goods are complements:
a decrease in the price of one will increase the demand for the other.
The study of economics is primarily concerned with:
choices that are made in seeking the best use of resources.
The invisible hand refers to
notion that, under competition, decisions motivated by self-interest promote the social interest.
The law of supply indicates that:
producers will offer more of a product at high prices than they will at low prices.
Assume a drought in the Great Plains reduces the supply of wheat. Noting that wheat is a basic ingredient in the production of bread and potatoes are a consumer substitute for bread, we would expect the price of wheat to:
rise, the supply of bread to decrease, and the demand for potatoes to increase.
An improvement in production technology will:
shift the supply curve to the right
Which of the following is a capital resource?
software used by a firm.
At the equilibrium price,
there are no pressures on price to either rise or fall.
