📚

All Subjects

🤑

AP Micro

💸

Unit 1

1.8 MC Answers and Review

6 min read•january 13, 2023

AP Microeconomics 🤑

95 resources

See Units

Answers and Review for Multiple Choice Practice on Basic Economic Concepts

⛔STOP ⛔ Before you look at the answers, make sure you gave this practice quiz a try so you can assess your understanding of the concepts covered in Unit 1. Click here for the practice questions: AP Micro Unit 1 Multiple Choice Questions.

Image courtesy of Pixabay

Facts about the test: The AP Microeconomics exam has 70 multiple choice questions and you will be given 1 hour to complete the section. That means it should take you around 8 minutes to complete 10 questions.

*The following questions were not written by College Board and, although they cover information outlined in the AP Microeconomics Course and Exam Description, the formatting on the exam may be different.

1. Scarcity is when...

A. we have unlimited wants and unlimited resources

B. our wants are greater than available resources

C. our resources are greater than our wants

D. resources are employed fully to minimize waste

Explanation: Scarcity is when our wants are greater than the available resources.

Read this guide to brush up on scarcity!

2. Instead of studying for your test, you could have cooked dinner, went to the movies, or exercised. These alternatives represent your...

A. scarcity

B. resources

C. trade-offs

D. time value of money

Explanation: Trade-offs are the alternatives to a specific choice we make. (The next best option to the choice you make is your opportunity cost.)

Watch this review on Unit 2!

3. A point located inside the production possibilities curve is thought of as...

A. an inefficient use of resources

B. an efficient use of resources

C. not possible given current resources

D. a better use of resources

Explanation: A point inside the PPC represents an inefficient use of resources, like high unemployment. (recession)

Read this guide on the Production Possibilities Curve!

4. A PPC that is bowed outward represents...

A. decreasing opportunity costs

B. constant opportunity costs

C. no opportunity costs

D. increasing opportunity costs

Explanation: A bowed out PPC means that with each additional unit of good A that is produced, you must give up an increasing number of units of good B. This shape typically means that the resources used to produce both goods vary (for example, bicycles and tacos).

Read this guide on the Production Possibilities Curve!

5. Trade helps two countries by allowing them to...

A. isolate production

B. make more money

C. despecialize and consume within their original PPCs

D. specialize and consume outside their original PPCs

Explanation: Trading allows two countries to specialize in the good in which they have a lower per-unit opportunity cost. When this occurs, they can focus their resources on only the production of this good and trade for other needs.

Read this guide on trade!

6. Producer A can produce either 5 units of chocolate or 10 aloe plants per day. Producer B can produce either 3 units of chocolate or 12 aloe plants per day. Based on this information, which of the following is true?

A. producer A has the absolute advantage in producing aloe

B. producer B has the absolute advantage in chocolate

C. producer B has the comparative advantage in producing chocolate

D. producer B has the comparative advantage in producing aloe

Explanation: Producer B's per-unit opportunity cost to produce a unit of aloe is 1/4 of a unit of chocolate, which producer A's per-unit opportunity cost of producing 1 unit of aloe is 1/2 unit of chocolate. Since producer B has the lower per-unit opportunity cost in producing aloe, it should specialize in the production of aloe and trade for chocolate.

Watch this review of basic economic concepts!

7. Prices in a market economy are set by...

A. the church

B. the government

C. market interactions between buyers and sellers

D. popular vote

Explanation: The "invisible hand" guides prices as sellers and buyers agree on prices for goods.

Read this guide about Market Equilibrium!

8. Anna has two hours of free time on Friday night that can be spent studying or watching TV. Anna decides to watch TV. Studying becomes Anna's...

A. calculated risk

B. absolute advantage

C. marginal revenue

D. opportunity cost

Explanation: Opportunity cost: the amount of one product that must be given up in order to produce an additional unit of another product; the next best option to the choice made.

Watch this review of basic economic concepts!

9. Which of the following is true if consuming one latte yields 20 utils and consuming the second latte increases satisfaction by 17 utils?

A. total utility of consuming both lattes is 37

B. total utility of consuming both lattes is 3

C. the marginal utility for the second latte is 3

D. the marginal utility for consuming the third latte is 7

Explanation: 20 + 17 = 37

Watch this review of basic economic concepts!

10. When making a rational decision, economists would point out that...

A. marginal cost is of no significance

B. marginal benefit is of no significance

C. marginal benefit should be less than marginal cost

D. marginal benefit should outweigh marginal cost

Explanation: In economics, we consume or do something until the marginal cost outweighs the marginal benefit.

Read this guide on cost-benefit analysis!

11. Which if the following is NOT a characteristic of a well-functioning command economy?

A. central decision-making body

B. property rights

C. scarce resources

D. supply

Explanation: In a pure command (socialist) economy, all resources are owned by the government and shared.

Read this guide on economic systems!

12. The factors of production include land, labor, capital and...

A. entrepreneurship

B. supply and demand

C. externalities

D. deficits

Explanation: 4 factors of production: land, labor, capital and entrepreneurship; entrepreneurs take risks in return for potential rewards.

Read this article about determinants of supply and demand!

13. If technological advancements lead to more efficient production...

A. the PPC would shift outward/to the right

B. the PPC would shift inward/to the left

C. there would be no movement in the PPC

D. there would be mass unemployment and higher price levels

Explanation: Economic growth caused by advances in technology shift the PPC to the right.

Read this guide on the Production Possibilities Curve!

14. Which of the following would shift the PPC to the left?

A. a decrease in the supply of consumer goods

B. an increase in the supply of capital goods

C. improvements in computer processors

D. a deep freeze that knocks out power grids, causing mass power outages

Explanation: Electricity is a resource, and a decrease in key resources decreases production and efficiency, shifting the PPC to the left.

Read this guide on the Production Possibilities Curve!

15. A PPC that demonstrates constant opportunity costs would be...

A. a straight line

B. bowed outward

C. bowed inward

D. upward sloping

Explanation: A PPC with constant opportunity costs has a straight line, and means that the producer could easily switch between the production of the two goods.

Read this guide on the Production Possibilities Curve!

What can we help you do now?