Download A.P. Microeconomics - Vesper Unit 1 Exam Multiple Choice Identify

A.P. Microeconomics - Vesper
Unit 1 Exam
Multiple Choice
Identify the letter of the choice that best completes the statement or answers the question.
____
1. The overriding reason as to why households and societies face many decisions is that
a. resources are scarce.
b. goods and services are not scarce.
c. incomes fluctuate with business cycles.
d. people, by nature, tend to disagree.
____
2. Economics is the study of
a. how society manages its scarce resources.
b. the government's role in society.
c. how a market system functions.
d. how to increase production.
____
3. In most societies, resources are allocated by
a. a single central planner.
b. a small number of central planners.
c. those firms that use resources to provide goods and services.
d. the combined actions of millions of households and firms.
____
4. A typical society strives to get the most it can from its scarce resources. At the same time, the society attempts
to distribute the benefits of those resources to the members of the society in a fair manner. In other words, the
society faces a tradeoff between
a. guns and butter.
b. efficiency and equity.
c. inflation and unemployment.
d. work and leisure.
____
5. A furniture maker currently produces 100 tables per week and sells them for a profit. She is considering
expanding her operation in order to make more tables. Should she expand?
a. Yes, because making tables is profitable.
b. No, because she may not be able to sell the additional tables.
c. It depends on the marginal cost of producing more tables and the marginal revenue she
will earn from selling more tables.
d. It depends on the average cost of producing more tables and the average revenue she will
earn from selling more tables.
____
6. Russell spends an hour studying instead of playing tennis. The opportunity cost to him of studying is
a. the improvement in his grades from studying for the hour.
b. the improvement in his grades from studying minus the enjoyment of playing tennis.
c. the enjoyment and exercise he would have received had he played tennis.
d. zero. Since Russell chose to study rather than to play tennis, the value of studying must
have been greater than the value of playing tennis.
A.P. Microeconomics - Vesper
____
7. A marginal change is a
a. change that involves little, if anything, that is important.
b. large, significant adjustment.
c. change for the worse, and so it is usually a short-term change.
d. small, incremental adjustment.
____
8. Mike has spent $500 purchasing and repairing an old fishing boat, which he expects to sell for $800 once the
repairs are complete. Mike discovers that, in addition to the $500 he has already spent, he needs to make an
additional repair, which will cost another $400, in order to make the boat worth $800 to potential buyers. He
can sell the boat as it is now for $300. What should he do?
a. He should sell the boat as it is now for $300.
b. He should keep the boat since it would not be rational to spend $900 on repairs and then
sell the boat for $800.
c. He should complete the repairs and sell the boat for $800.
d. It does not matter which action he takes; the outcome is the same either way.
____
9. Trade between the United States and India
a. benefits both the United States and India.
b. is a losing proposition for the United States because India has cheaper labor.
c. is a losing proposition for India because capital is much more abundant in the U.S. than in
India.
d. is a losing proposition for India because U.S. workers are more productive.
____ 10. Which of the following statements does not apply to a market economy?
a. Firms decide whom to hire and what to produce.
b. No one is looking out for the economic well-being of society as a whole.
c. Households decide which firms to work for and what to buy with their incomes.
d. Government policies are the primary forces that guide the decisions of firms and
households.
____ 11. In a market economy, economic activity is guided by
a. the government.
b. corporations.
c. central planners.
d. self-interest and prices.
____ 12. The "invisible hand" directs economic activity through
a. advertising.
b. prices.
c. central planning.
d. government regulations.
____ 13. A company that formerly produced software went out of business because too many potential customers
bought illegally-produced copies of the software instead of buying the product directly from the company.
This instance serves as an example of
a. market power.
b. market failure.
c. inadequate enforcement of property rights.
d. the invisible hand at work.
A.P. Microeconomics - Vesper
____ 14. Which of the following is not generally regarded as a legitimate reason for the government to intervene in a
market?
a. to promote efficiency
b. to promote equity
c. to enforce property rights
d. to protect an industry from foreign competition
____ 15. Laws that restrict the smoking of cigarettes in public places are examples of government intervention that is
intended to reduce
a. the influence of the invisible hand.
b. trade.
c. externalities.
d. market power.
____ 16. A market economy rewards people according to their
a. need for goods and services.
b. willingness to work.
c. ability to produce things that other people are willing to pay for.
d. ability to produce things of cultural importance.
____ 17. When a single person (or small group) has the ability to influence market prices, there is
a. competition.
b. market power.
c. an externality.
d. a lack of property rights.
____ 18. The primary determinant of a country's standard of living is
a. the country’s ability to prevail over foreign competition.
b. the country’s ability to produce goods and services.
c. the total supply of money in the economy.
d. the average age of the country's labor force.
____ 19. A typical worker in Italy can produce 24 units of product in an eight-hour day, while a typical worker in
Poland can produce 25 units of product in a 10-hour day. We can conclude that
a. worker productivity in Poland is higher than in Italy.
b. the standard of living will likely be higher in Italy than in Poland.
c. productivity is 3 units per hour for the Polish worker and 21/2 units per hour for the Italian
worker.
d. there will be no difference between the standard of living in Italy and Poland.
____ 20. To increase living standards, public policy should
a. ensure that workers are well educated and have the necessary tools and technology.
b. make unemployment benefits more generous.
c. move workers into jobs directly from high school.
d. ensure a greater degree of equity, taking all income-earners into account.
A.P. Microeconomics - Vesper
____ 21. Large or persistent inflation is almost always caused by
a. excessive government spending.
b. excessive growth in the quantity of money.
c. foreign competition.
d. higher-than-normal levels of productivity.
____ 22. Germany could have avoided the high inflation that it experienced in the 1920s by
a. not directing so many of its resources toward preparation for World War II.
b. not increasing taxes so much on the German middle class.
c. not allowing the quantity of money to increase so rapidly.
d. using government policies to stimulate the economy more so than what was done.
____ 23. The circular-flow diagram is a
a. visual model of how the economy is organized.
b. visual model of the relationships among money, prices, and businesses.
c. model that shows the effects of government on the economy.
d. mathematical model of how the economy works.
____ 24. In the simple circular-flow diagram, the participants in the economy are
a. firms and government.
b. households and firms.
c. households and government.
d. elected officials and ordinary citizens.
Figure 2-1
____ 25. Refer to Figure 2-1. Juan buys a new pair of shoes at a shoe store and the shoe store gives Juan his new
shoes. To which of the arrows does this purchase directly contribute?
a. A only
b. A and B
c. C only
d. C and D
____ 26. Refer to figure 2-1. Juan fills out an application to work at McDonalds and McDonalds hires him. To which
of the arrows does this action directly contribute?
a. A only
b. A and B
c. C only
d. C and D
A.P. Microeconomics - Vesper
____ 27. Suppose a nation is currently producing at a point inside its production possibilities frontier. We know that
a. the nation is producing beyond its capacity, and inflation will occur.
b. the nation is not using all available resources and/or is using inferior technology.
c. the nation is producing an efficient combination of goods.
d. there will be a large opportunity cost if the nation tries to increase production of any good.
Figure 2-3
____ 28. Refer to Figure 2-3. Efficient production is represented by which point or points?
a. B, E
b. A, B, E
c. D
d. C
____ 29. Refer to Figure 2-3. Inefficient production is represented by which point or points?
a. D
b. D, E
c. A, C
d. A, B
____ 30. Refer to figure 2-3. Which answer best describes point E?
a. A country that specializes in the production of tubas.
b. A country that specializes in the production of tractors.
c. A country that does not use all of it resources
d. Overproduction
A.P. Microeconomics - Vesper
Figure 2-4
____ 31. Refer to Figure 2-4. The opportunity cost of obtaining 15 additional toasters by moving from point D to
point C is
a. 10 toothbrushes.
b. 20 toothbrushes.
c. 30 toothbrushes.
d. none of the above; the economy cannot move from point D to point C.
____ 32. Refer to Figure 2-4. The opportunity cost of obtaining 20 additional toasters by moving from point B to
point A is
a. 10 toothbrushes.
b. 20 toothbrushes.
c. 30 toothbrushes.
d. zero, since the economy has the additional resources to produce 10 additional toasters.
____ 33. Refer to figure 2-4. Which answer best decribes point C?
a. When 25 toasters are produced, then 50 toothbrushes can be produced.
b. When 25 toasters are consumed, then 50 toothbrushes can be consumed.
c. It is always possible to produce at point C if there is an increae in technology.
d. Point C can represent a consumption possibility if trade and specialization was utilized.
A.P. Microeconomics - Vesper
Figure 2-6
____ 34. Refer to Figure 2-6. If this economy put all available resources into the production of bananas, it could
produce
a. 200 bananas and also 150 baseballs.
b. 300 bananas and also 100 baseballs.
c. 400 bananas and no baseballs.
d. It is impossible to know unless we know the quantity of resources available.
Table 2-1. Production Possibilities for Toyland
Dolls
400
300
200
100
0
Fire Trucks
0
200
350
450
500
____ 35. Refer to Table 2-1. What is the opportunity cost to Toyland of increasing the production of dolls from 200 to
300?
a. 200 fire trucks
b. 150 fire trucks
c. 100 fire trucks
d. It is impossible to tell what the opportunity cost is since in this example costs are not
constant.
____ 36. Suppose an economy produces two goods, food and machines. This economy always operates on its
production possibilities frontier. Last year, it produced 50 units of food and 30 machines. This year, it is
producing 55 units of food and 33 machines. Which of the following events could not explain the increase in
output?
a. a reduction in unemployment
b. an increase in available labor
c. an improvement in technology
d. Any of these events could explain the increase in output.
A.P. Microeconomics - Vesper
____ 37. Which of the following statements is not correct?
a. Trade allows for specialization.
b. Trade has the potential to benefit all nations.
c. Trade allows nations to consume outside of their production possibilities curves.
d. Absolute advantage is the driving force of specialization.
____ 38. If labor in Mexico is less productive than labor in the United States in all areas of production,
a. neither nation can benefit from trade.
b. Mexico can benefit from trade but the United States cannot.
c. the United States will have a comparative advantage relative to Mexico in the production
of all goods.
d. both Mexico and the United States still can benefit from trade.
Table 3-1
Farmer
Rancher
Labor Hours Needed to Make 1
Pound of:
Meat
Potatoes
8
2
4
5
Pounds produced in 40 hours:
Meat
Potatoes
5
20
10
8
____ 39. Refer to Table 3-1. The farmer has an absolute advantage in
a. potatoes, and the rancher has a comparative advantage in meat.
b. meat, and the rancher has a comparative advantage in potatoes.
c. neither good, and the rancher has a comparative advantage in potatoes.
d. neither good, and the rancher has a comparative advantage in meat.
Figure 3-1
____ 40. Refer to Figure 3-1. Assume both Paul and Cliff divide their time equally between the production of corn
and wheat, and they do not trade. If they are the only producers of wheat and corn, then total production of
wheat and corn is
a. 8 bushels of wheat and 7 bushels of corn.
b. 7 bushels of wheat and 6 bushels of corn.
c. 6 bushels of wheat and 8 bushels of corn.
d. 7 bushels of wheat and 7 bushels of corn.
A.P. Microeconomics - Vesper
Figure 3-2
____ 41. Refer to Figure 3-2. Jerry has an absolute advantage in
a. both goods and Ben has a comparative advantage in ice cream.
b. neither good and Ben has a comparative advantage in cones.
c. ice cream and Ben has a comparative advantage in ice cream.
d. ice cream and Ben has a comparative advantage in cones.
____ 42. Suppose a gardener produces both green beans and corn in her garden. If she must give up 14 bushels of corn
to get 5 bushels of green beans, then her opportunity cost of 1 bushel of green beans is
a. 0.36 bushel of corn.
b. 2.4 bushels of corn.
c. 2.8 bushels of corn.
d. 70 bushels of corn.
Table 3-3
Montana
Missouri
Labor Hours Needed to Make
One:
Basket
Birdhouse
6
2
3
1.5
Amount Produced in 24 Hours:
Baskets
Birdhouses
4
12
8
16
____ 43. Refer to Table 3-3. The opportunity cost of 1 basket for Montana is
a. 1/3 birdhouse.
b. 1 birdhouse.
c. 3 birdhouses.
d. 4 birdhouses.
____ 44. Refer to Table 3-3. The opporutnity cost of 3 baskets for Missouri is
a. 1/6 birdhouses
b. 6 birdhouses
c. 1/3 birdhouses
d. 3 birdhouses
A.P. Microeconomics - Vesper
____ 45. Suppose Susan can wash three windows per hour or she can iron six shirts per hour. Paul can wash two
windows per hour or he can iron five shirts per hour.
a. Susan has an absolute advantage over Paul in washing windows.
b. Susan has a comparative advantage over Paul in washing windows.
c. Paul has a comparative advantage over Susan in ironing shirts.
d. All of the above are correct.
These figures illustrate the production possibilities available to Barney and Betty with 8 hours of labor in their
bakery.
Figure 3-4
____ 46. Refer to Figure 3-4. The opportunity cost of 1 pie for Betty is
a. 1/4 loaf of bread.
b. 3/4 loaf of bread.
c. 1 loaf of bread.
d. 4/3 loaves of bread.
____ 47. Refer to Figure 3-4. Barney has an absolute advantage in
a. both goods and Betty has an absolute advantage in neither good.
b. loaves of bread and Betty has an absolute advantage in pies.
c. pies and Betty has an absolute advantage in loaves of bread.
d. neither good and Betty has an absolute advantage in both goods.
____ 48. Belarus has a comparative advantage in the production of linen, but Russia has an absolute advantage in the
production of linen. If these two countries decide to trade,
a. Belarus should export linen to Russia.
b. Russia should export linen to Belarus.
c. trading linen would provide no net advantage to either country.
d. Without additional information about opportunity costs, this question cannot be answered.
A.P. Microeconomics - Vesper
____ 49. Canada and the U.S. both produce wheat and computer software. Canada is said to have the comparative
advantage in producing wheat if
a. Canada requires fewer resources than the U.S. to produce a bushel of wheat.
b. the opportunity cost of producing a bushel of wheat is lower for Canada than it is for the
U.S.
c. the opportunity cost of producing a bushel of wheat is lower for the U.S. than it is for
Canada.
d. the U.S. has an absolute advantage over Canada in producing computer software.
____ 50. Assume for the United States that the opportunity cost of each airplane is 100 cars. Then which of these pairs
of points could be on the United States' production possibilities frontier?
a. (200 airplanes, 5,000 cars) and (150 airplanes, 4,000 cars)
b. (200 airplanes, 10,000 cars) and (150 airplanes, 20,000 cars)
c. (300 airplanes, 15,000 cars) and (200 airplanes, 25,000 cars)
d. (300 airplanes, 25,000 cars) and (200 airplanes, 40,000 cars)
Table 3-5
Japan
U.S.
Hours needed to make one:
Car
Airplane
30
150
50
200
Amount produced in 2400 hours:
Cars
Airplanes
80
16
48
12
____ 51. Refer to Table 3-5. The opportunity cost of 1 car for the United States is
a. 4 airplanes.
b. 3 airplanes.
c. 1/3 airplane.
d. 1/4 airplane.
____ 52. Refer to Table 3-5. Japan has an absolute advantage in
a. both goods and the United States has a comparative advantage in cars.
b. both goods and the United States has a comparative advantage in airplanes.
c. cars (but not airplanes) and the United States has a comparative advantage in airplanes.
d. airplanes (but not cars) and the United States has a comparative advantage in cars.
____ 53. Refer to Table 3-5. The United States has an absolute advantage in
a. airplanes and Japan has an absolute advantage in cars.
b. cars and Japan has an absolute advantage in airplanes.
c. both cars and airplanes.
d. neither cars nor airplanes.
____ 54. Refer to Table 3-5. If the United States and Japan specialize and trade based on the principle of comparative
advantage, the United States will
a. export cars and Japan will export airplanes.
b. export airplanes and Japan will export cars.
c. export cars and Japan will export cars.
d. export airplanes and Japan will export airplanes.
A.P. Microeconomics - Vesper
Figure 3-5 The graph below represents the various combinations of cars and corn that Country A could
produce in a given month. (On the vertical axis, corn is measured in bushels.)
____ 55. Refer to Figure 3-5. For Country A, what is the opportunity cost of each additional car that it decides to
produce?
a. 25 bushels of corn
b. 30 bushels of corn
c. 35 bushels of corn
d. 40 bushels of corn
A.P. Microeconomics - Vesper
Unit 1 Exam
Answer Section
MULTIPLE CHOICE
1. ANS:
MSC:
2. ANS:
MSC:
3. ANS:
MSC:
4. ANS:
MSC:
5. ANS:
MSC:
6. ANS:
MSC:
7. ANS:
MSC:
8. ANS:
MSC:
9. ANS:
MSC:
10. ANS:
MSC:
11. ANS:
MSC:
12. ANS:
MSC:
13. ANS:
MSC:
14. ANS:
MSC:
15. ANS:
MSC:
16. ANS:
MSC:
17. ANS:
MSC:
18. ANS:
MSC:
19. ANS:
MSC:
20. ANS:
MSC:
21. ANS:
MSC:
22. ANS:
A
Interpretive
A
Definitional
D
Interpretive
B
Interpretive
C
Applicative
C
Applicative
D
Definitional
C
Analytical
A
Interpretive
D
Interpretive
D
Definitional
B
Interpretive
C
Interpretive
D
Interpretive
C
Applicative
C
Interpretive
B
Definitional
B
Interpretive
B
Applicative
A
Applicative
B
Interpretive
C
DIF: 2
REF: 1-0
TOP: Scarcity
DIF: 1
REF: 1-0
TOP: Economies, Scarcity
DIF: 1
REF: 1-0
TOP: Resource allocation
DIF: 1
REF: 1-1
TOP: Efficiency, Equity
DIF: 2
REF: 1-1
TOP: Marginal changes
DIF: 3
REF: 1-1
TOP: Opportunity cost
DIF: 1
REF: 1-1
TOP: Marginal changes
DIF: 3
REF: 1-1
TOP: Marginal cost
DIF: 2
REF: 1-2
TOP: Trade
DIF: 2
REF: 1-2
TOP: Market economy
DIF: 1
REF: 1-2
TOP: Market economy
DIF: 2
REF: 1-2
TOP: Invisible hand
DIF: 2
REF: 1-2
TOP: Property rights
DIF: 2
REF: 1-2
TOP: Government, Markets
DIF: 2
REF: 1-2
TOP: Externalities, Government
DIF: 2
REF: 1-2
TOP: Market economy
DIF: 1
REF: 1-2
TOP: Market power
DIF: 2
REF: 1-3
TOP: Standard of living
DIF: 3
REF: 1-3
TOP: Productivity, Standard of living
DIF: 2
REF: 1-3
TOP: Productivity, Standard of living
DIF: 2
REF: 1-3
TOP: Inflation
DIF: 2
REF: 1-3
TOP: Inflation, Money
A.P. Microeconomics - Vesper
MSC:
23. ANS:
MSC:
24. ANS:
MSC:
25. ANS:
MSC:
26. ANS:
27. ANS:
MSC:
28. ANS:
MSC:
29. ANS:
MSC:
30. ANS:
31. ANS:
TOP:
32. ANS:
TOP:
33. ANS:
34. ANS:
MSC:
35. ANS:
MSC:
36. ANS:
MSC:
37. ANS:
MSC:
38. ANS:
MSC:
39. ANS:
TOP:
40. ANS:
MSC:
41. ANS:
TOP:
42. ANS:
MSC:
43. ANS:
MSC:
44. ANS:
45. ANS:
TOP:
46. ANS:
MSC:
47. ANS:
MSC:
48. ANS:
Applicative
A
DIF: 1
REF: 2-1
Definitional
B
DIF: 1
REF: 2-1
Definitional
B
DIF: 2
REF: 2-1
Applicative
D
B
DIF: 2
REF: 2-1
Interpretive
A
DIF: 2
REF: 2-1
Interpretive
A
DIF: 2
REF: 2-1
Interpretive
A
D
DIF: 2
REF: 2-1
Production possibilities frontier, Opportunity cost
C
DIF: 2
REF: 2-1
Production possibilities frontier, Opportunity cost
D
C
DIF: 2
REF: 2-1
Interpretive
B
DIF: 2
REF: 2-1
Interpretive
A
DIF: 3
REF: 2-1
Applicative
D
DIF: 2
REF: 3-2
Interpretive
D
DIF: 2
REF: 3-2
Interpretive
A
DIF: 3
REF: 3-2
Absolute advantage, Comparative advantage
D
DIF: 2
REF: 3-2
Applicative
D
DIF: 3
REF: 3-2
Absolute advantage, Comparative advantage
C
DIF: 2
REF: 3-2
Interpretive
C
DIF: 2
REF: 3-2
Applicative
B
D
DIF: 2
REF: 3-2
Absolute advantage, Comparative advantage
D
DIF: 2
REF: 3-2
Applicative
D
DIF: 2
REF: 3-2
Applicative
A
DIF: 2
REF: 3-3
TOP: Circular-flow diagram
TOP: Circular-flow diagram
TOP: Circular-flow diagram
TOP: Production possibilities frontier
TOP: Production possibilities frontier
TOP: Production possibilities frontier
MSC: Interpretive
MSC: Interpretive
TOP: Production possibilities frontier
TOP: Opportunity cost
TOP: Production possibilities frontier
TOP: Specialization, Trade
TOP: Comparative advantage, Trade
MSC: Applicative
TOP: Production possibilities frontier
MSC: Applicative
TOP: Opportunity cost
TOP: Opportunity cost
MSC: Applicative
TOP: Opportunity cost
TOP: Absolute advantage
A.P. Microeconomics - Vesper
TOP:
49. ANS:
TOP:
50. ANS:
TOP:
51. ANS:
MSC:
52. ANS:
TOP:
53. ANS:
MSC:
54. ANS:
MSC:
55. ANS:
TOP:
Absolute advantage, Comparative advantage, Trade
B
DIF: 1
REF: 3-2
Opportunity cost, Comparative advantage
C
DIF: 2
REF: 3-2
Opportunity cost, Production possibilities frontier
D
DIF: 2
REF: 3-3
Applicative
B
DIF: 3
REF: 3-3
Absolute advantage, Comparative advantage
D
DIF: 2
REF: 3-3
Applicative
B
DIF: 2
REF: 3-3
Applicative
B
DIF: 2
REF: 3-3
Opportunity cost, Production possibilities frontier
MSC: Interpretive
MSC: Definitional
MSC: Applicative
TOP: Opportunity cost
MSC: Applicative
TOP: Absolute advantage
TOP: Comparative advantage, Trade
MSC: Applicative