AP Macro Econ Unit 1 Study Guide
The table above shows the maximum amount of trucks or coffee that China and Malaysia can produce 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?
1 ton of coffee for 4 trucks
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?
2 skating rinks
A leftward shift of the supply curve for computers could be caused by which of the following in the short run?
A decrease in the number of computer manufacturers
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 decrease in the price of chicken
Which of the following changes will most likely result in a movement from point X to point Y along the demand curve D1 ?
A decrease in the price of video games
The graph above shows the production possibilities curves (PPC) for an economy. The concept of opportunity cost is best represented by which of the following?
A movement from point B to point C
Which of the following changes will most likely cause a shift of the demand curve from D1 to D2 as shown in the diagram?
An increase in consumers' income, assuming that video games are a normal good
Which of the following changes would result in an indeterminate change in the equilibrium price in a competitive market?
An increase in demand and an increase in supply
An economy is operating at a point inside its production possibilities curve (PPC). Which of the following will most likely cause the economy to move toward the current PPC in the short run?
An increase in employment
Which of the following will increase the market supply for new automobiles?
An increase in subsidies to automobile manufacturers
Which of the following describes the law of supply?
An increase in the price of a good will increase the quantity supplied.
Which of the following changes will increase the demand for bicycles?
An increase in the price of scooters, a substitute good
Suppose countries Alphania and Betania produce electronics and apparel using identical resources. Which of the following is true if Alphania exports electronics to and imports apparel from Betania within a free-trade system ?
Betania has a comparative advantage in producing apparel, and Alphania has a comparative advantage in producing electronics.
Sam and Bill run a leaf raking and lawn mowing business. In one day, Sam can rake 3 lawns or mow 5 lawns whereas Bill can rake 2 lawns or mow 6 lawns. Which of the following correctly describes Sam's and Bill's absolute and comparative advantages?
Bill has a comparative advantage in mowing and an absolute advantage in mowing.
The table above shows the quantity of motorcycles and automobiles produced by two countries that use the same amount of resources. Which of the following is true?
Country Y has an absolute and comparative advantage in the production of motorcycles.
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?
Equilibrium price will decrease and equilibrium quantity will increase
The graph above shows the production possibilities curve for Factory X and Factory Y. If Factory X uses the same amount of resources to produce skateboards and bikes as Factory Y uses, which of the following is true?
Factory X has a comparative advantage in producing skateboards.
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? I. A decrease in domestic production of Y II. An increase in domestic production of Y III. An increase in foreign output of Y
II only
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?
It will increase now because the tax on imported grains will increase the future price of grains.
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. Michael and Martha have the same amount of resources. Given this information which of the following is true?
Michael has an absolute and a comparative advantage in changing oil.
Which of the following describes the relationship between price and quantity demanded according to the law of demand?
Negative relationship, illustrated by a downward-sloping demand curve
What type of opportunity costs do PPC1 and PPC2 illustrate?
PPC1 illustrates increasing opportunity costs and PPC2 illustrates constant opportunity costs.
Which of the following describes the relationship between price and quantity supplied according to the law of supply?
Positive relationship, illustrated by an upward-sloping supply curve
If one-fourth of a nation's wheat crop is destroyed by a flood in a given season, then the price of wheat and the quantity sold will change in the short run in which of the following ways?
Price: Increase Quantity Sold: Decrease
How will an increase in demand and a simultaneous decrease in supply affect the equilibrium price and quantity of a good in a market?
Price: Increase Quantity: Indeterminate
Assume that the market for bottled water is in equilibrium. If both the supply of and the demand for bottled water decrease, what will be the effect on equilibrium price and quantity?
Price: Indeterminate Quantity: Decrease
A simultaneous increase in both the demand for and the supply of a good in a market will lead to which of the following changes in the equilibrium price and quantity of the good?
Price: Indeterminate Quantity: Increase
Which of the following contributes to the economic problem of scarcity?
Resources are limited
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?
Scarcity
Based on the information in the table, which of the following is true?
Simone has an absolute advantage in trimming trees and mowing lawns.
Which of the following is not considered an economic resource?
Stocks
In the coffee market, which of the following changes will increase the price and decrease the quantity of coffee?
Supply: Decrease Demand: No change
Which of the following illustrates the effect of a decrease in an economy's resources using a production possibilities curve (PPC)?
The economy's PPC will shift inward and to the left.
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?
The equilibrium price will be indeterminate, and the equilibrium quantity will decrease.
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 equilibrium quantity in the Japanese Matcha tea market?
The equilibrium price will be indeterminate, and the equilibrium quantity will increase.
At a price of P0 in the diagram above, which of the following is true?
The existing shortage in the market will cause upward pressure on prices until equilibrium is reached at 60 units.
When the price of a candy bar is $6.00, which of the following is true?
The market does not clear because the price is higher than the equilibrium price and there will be a surplus in the market.
If the wage rate of workers producing a good decreases, then which of the following will most likely occur?
The supply of the good will increase.
In the competitive market represented by the graph provided, which of the following is true at a price of
There is a shortage of 35 units.
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?
This event will likely cause an increase in the supply of the good in both nations.
Which of the following is the most fundamental issue that economics addresses?
Use of scarce resources
Which of the following describes scarcity?
Wants exceed resources.
The table shows the production possibilities for Country X in producing shirts and chairs when it uses all its available resources. The opportunity cost of producing one additional chair is
constant
The theory of comparative advantage implies that Alpha would find it advantageous to
export grain and import steel
Scarcity exists because
human wants exceed the productive capacity of the economy
A production possibilities curve that is concave to the origin (bowed out) implies that as more of a good is produced, the opportunity cost
increases
The fundamental economic problem is
the scarcity of resources
The concept of opportunity cost would no longer be relevant if
the supply of all resources were unlimited
The opportunity cost of an activity is
the value of the forgone benefit of the next best alternative