AP Econ Unit One L7 Homework Packet
Name: ________________________________
____1. Microeconomics approaches the study of economics from the viewpoint of: A. the entire economy. B. individual markets. C. governmental units. D. individual consumers. ____2. Macroeconomics focuses on:
A. individual units that make up the whole economy.
B. studies of how individual markets and industries are organized. C. total output and price levels of a whole society.
D. how a business determines how much of a product to produce. ____3. The fundamental problem of economics is:
A. to achieve more equal distribution of income in society. B. that resources are scarce relative to human wants.
C. to establish prices which are fair for both producers and consumers. D. that product prices rise more rapidly than the incomes of consumers. ____4. The term scarcity in economics refers to the fact that:
A. human wants are limited.
B. even in the richest countries people go hungry.
C. no country can produce enough to satisfy everyone's wants. D. it is impossible to produce too much of a desirable good. ____5. As used in economics, the idea of scarce resources means that:
A. mineral deposits are only available in finite amounts.
B. resources are not so plentiful that all economic wants can be fulfilled. C. some resources are free while others have price tags on them.
D. the quantities available of some resources exceed demand for them. ____6. Scarcity is correctly described by which of the following statements?
I. Scarcity exists if there are more uses for resources than can be satisfied at one time. II. Scarcity exists if decisions must be made about alternative uses for resources.
III. Scarcity would not exist in a society in which people wanted to help others instead of themselves. A. I only
B. II only C. III only D. I and II only E. I, II and III
____7. Which of the following is NOT a factor of production?
____8. An economist would classify all of the following as land except which item? A. two thousand acres of forest in California.
B. a hydroelectric dam in Nevada.
C. crude oil reserves in the Arctic Wilderness. D. iron ore deposits in Wisconsin.
____9. An economist could classify all of the following as capital except for which item?
A. a college education. B. a sandwich-making machine. C. a $100 bill. D. a factory.
____10. Money is not an economic resource (factor of production) because: A. money, as such, is not productive.
B. idle money balances donot earn interest income.
C. the terms of trade can be determined in nonmonetary terms. D. money is not a free gift of nature.
____11. Individuals who bring together land, labor and capital and assume the risk of producing new products are called: A. entrepreneurs. B. fools.
C. bankers. D. managers.
____12. An economist would consider all of the following labor except for which item? A. time spent producing shoes. B. time spent teaching.
C. time spent cutting hair. D. time spent watching baseball. ____13. The three economic questions that any group of people must decide on are:
A. Who is going to do the work, who is going to enjoy leisure time and who is going to be the boss. B. What will we produce, how will we produce it and who will get it.
C. Who is going to be the boss, who is going to be the worker and who will pay for the products. D. Who gets pizza, who gets soda and who gets peanuts.
____14. In return for the factors of production of land, labor, capital and entrepreneurship, the correct order of resource payments would be:
A. wages, rent, profits and interest. B. rent, wages, interest and profits. C. interest, wages, profits and rent. D. none of the above.
____15. The difference between positive analysis and normative analysis is that:
A. positive analysis focuses on facts and provable relationships while normative analysis focuses on policy preferences.
B. positive analysis focuses on what ought to be while normative analysis focuses on what is .
C. positive analysis is used by government policy makers while normative analysis has been discredited. D. market-driven economies tend to focus on positive analysis while command economies focus on
____17. In which of the following examples would a ceteris paribus assumption be important? A. In estimating production possibilities for a country.
B. In evaluating how much land, labor and capital a nation should allocate toward capital goods vs. consumer goods.
C. In determining how much two countries should trade with each other. D. All of the above.
____18. Why do economists focus on the positive quandrant in graphs? A. Economists have chosen that as a matter of form.
B. Most variables studied by economists have positive values. ____19. A direct, or positive, relationship between two variables exists when a(n):
A. increase in the value of one variable causes the value of the other to decrease. B. decrease in the value of one variable causes the value of the other to increase. C. decrease in the value of one variable causes the value of the other to decrease. D. increase in the value of one variable casues no change in the other variable. ____20. An inverse, or negative, relationship between two variables exists when a(n):
A. increase in the value of one variable causes the value of the other to decrease. B. decrease in the value of one variable causes the value of the other to decrease. C. increase in the value of one variable causes the value of the other to increase. D. increase in the value of one variable causes no change in the other variable. Use the following information to answer questions 21-22.
____21. In line (1) on the above graph, the variables x and y are:
A. nonlinearly related. B. positively related. C. negatively related. D. inversely related. ____22. In line (3) on the above graph, variables x and y are:
X Y 1 5 2 10 3 15 4 20 5 25
____23. Use the table of numbers above to create a graph in the space provided or on a separate sheet of graph paper. Include correctly labeled axes. Is the relationship between variables that you graphed direct or inverse?
X Y 1 25 2 20 3 15 4 10 5 5
____24. Use the table of numbers above to create a graph in the space provided or on a separate sheet of graph paper. Include correctly labeled axes. Is the relationship between variables that you graphed direct or inverse?
Use the following information to answer questions 25-27. Tractors Bread 20 16 12 8 4 0 A B C D E 1 2 3 4
____25. Refer to the above diagram. Which of the following is a positive statement?
A. A point inside the production possibilities curve is superior to a point on the curve because the former requires less work effort.
B. Because any society should stress economic growth as its major goal, point D is superior to point C . C. Point B is preferable to point C because the ultimate goal of economic activity is to maximize
consumption.
D. Given its resources and technology, this society is incapable of simultaneously producing 3 units of tractors and 15 units of bread.
____26. Refer to the above diagram. Which of the following is a normative statement?
A. Point C is superior to point B because it is important to look to the future of society.
B. If society is initially at point C , it must sacrifice 6 units of bread to obtain one more unit of tractors. C. If society produces 2 units of tractors and 12 units of bread, it is not using its available resources with
maximum efficiency.
D. Other things equal, the combination of outputs represented by point D will result in more rapid economic growth than will the combination represented by point C .
____27. Refer to the above diagram. This production possibilities curve is constructed such that: A. resources are presumed to be perfectly shiftable between bread and tractors. B. the opportunity cost of bread diminishes as more tractors are produced. C. the opportunity cost of tractors diminishes as more bread is produced.
Use the following information to answer questions 28-31.
Answer the next question(s) on the basis of the data given in the following production possibilities table: Production possibilities (alternatives)
A B C D E F Capital goods 5 4 3 2 1 0 Consumer goods 0 5 9 12 14 15
____28. Using the data in the table above, graph a production possiblities curve in the space provided or on a separate sheet of graph paper. Label all axes and label the PPF.
____29. 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.
____30. Refer to the above table. If the economy is producing at production alternative C, the opportunity cost of the tenth unit of consumer goods will be:
A. 4 units of capital goods. B. 2 units of capital goods. C. 3 units of capital goods. D. 1/3 unit of capital goods.
____31. Refer to the above table. If the economy is producing at production alternative A, the opportunity cost of the first unit of consumer goods will be:
A. 1/5 unit of capital goods. B. 1 unit of capital goods. C. 5 units of capital goods.
Use the following information to answer questions 32-36. A B E D C 0 Consumer goods Capital goods
____32. The graph above shows the production possibilities frontier for an economy producing two goods. Which of the points on the graph show that not all available resources are being used?
A. E only B. D only C. D and E D. all the points. ____33. Points A, B and C on the above graph show:
A. an inefficient use of society's scarce resources.
B. that there is always a one-for-one trade-off between consumer and capital goods.
C. that there are many possible combinations of consumer and capital goods to be produced. D. impossible combinations of consumer and capital goods.
____34. The combination of consumer and capital goods production shown by point E on the above graph: A. is not sustainable given this society's available land, labor and capital.
B. can be attained only if some of this society's resources are unemployed. C. suggests that the law of increasing costs is not relevant in this case. D. results only because society allocates resources inefficiently.
____35. The diagram above shows the production possibilities curve for Country Y. Which of the following statements is true?
A. If Country Y is producing at point C, it is using all its resources efficiently. B. The opportunity cost of producing more consumer goods is constant. C. Producing at point C is preferable because it will ensure long-term growth. D. Country Y cannot produce at point D.
E. Country Y is not producing at its potential since it is not producing at point E.
____36. The diagram above shows an economy's current production possibilities curve for capital goods and consumer goods. If this society chooses point C over point A, it is choosing which of the following outcomes?
A. More capital goods today and increase in production in the future. B. More capital goods today at the expense of future growth. C. More capital goods today at the expense of consumer goods.
D. More consumer goods today and an increase in production in the future. E. More consumer goods today at the expense of future growth.
____37. 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 seek that level of output at which all of its resources are employed. C. if all the resources of an economy are in use, more of one good can be produced only if less of another
____38. Which of the following will not produce an outward shift of the production possibilities curve? A. an upgrading 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 ____39. 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. can both be illustrated by a point outside the production possibilities curve. D. can both be illustrated by a point inside the production possibilities curve. ____40. A production possibilities curve shows:
A. that resources are limited.
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 produced specific levels of output. ____41. The production possibilites 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 those combinations that are most preferred by a society. ____42. If the production possibilities curve was a straight line, this would imply that:
A. the two products will sell at the same market prices.
B. economic resources are perfectly shiftable between the production of the two products. C. the two products are equally important to consumers.
D. equal quantities of the two products will be produced at each possible point on the curve.
____43. When an economy is operating with maximum efficiency, the production of more of commodity A will entail the production of less of commodity B because:
A. of the law of increasing opportunity costs. B. material wants are insatiable.
C. the structure of demand is fixed at any point in time. D. resources are limited.
E. resources are specialized and only imperfectly shiftable.
____44. A nation's production possibilities curve is "bowed out" from the orgin because: A. resources are not equally efficient in producing every good.
____45. An opportunity cost is entailed in which of the following situations? I. A student decides to attend college full-time.
II. A family uses its $20,000 in savings to purchase an automobile. III. A farmer decides to grow more wheat and less corn.
A. I only B. II only C. III only D. I and III only E. I, II and III
____46. Assume that a change in government policy results in the increased production of both consumer goods and investment goods. It can be concluded 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) as viewed from the origin. D. the law of increasing opportunity costs does not apply in this society.
____47. Karen works part-time at a local convenience store and earns $10/hour. She wants to spend next Saturday afternoon attending a concert. The full price of the concert ticket is $75, but Karen was able to get a discounted price of $50 from a friend who couldn't use his ticket. If Karen took 4 hours off of work to attend the concert, what was her opportunity cost of attending the concert?
A. $40. B. $50. C. $75. D. $90. E. $115.
____48. If it were possible to increase the output of military goods and simultaneously to increase the output of the private sector of an economy, which of the following statements about the economy and its current position relative to its production possibilities curve would be true?
A. The economy is inefficient and inside the curve. B. The economy is inefficient and on the curve. C. The economy is efficient and on the curve. D. The economy is efficient and inside the curve. E. The economy is efficient and outside the curve.
Answer the next question(s) on the basis of the following production possibilities data for Gamma and Sigma. All data are in tons.
Gamma production possibilities:
A B C D E Tea 120 90 60 30 0 Pots 0 30 60 90 120 Sigma production possibilities:
A B C D E Tea 40 30 20 10 0 Pots 0 30 60 90 120 ____49. On the basis of the above information:
A. Gamma should export both tea and pots to Sigma.
B. Sigma should export tea to Gamma and Gamma should export pots to Sigma. C. Gamma should export tea to Sigma and Sigma should export pots to Gamma.
D. Gamma should export tea to Sigma, but it will not be profitable for the two nations to exchange pots.
Baseball bats East Mudsville Baseball bats West Mudsville Baseballs 0 Baseballs 8 9 0 9 4
____50. The production possibilities curves above suggest that:
A. West Mudville should specialize in, and export, baseball bats.
B. West Mudville should specialize in, and export, both baseballs and baseball bats. C. East Mudville should specialize in, and export, baseball bats.
