AP Quiz 1. Multiple Choice Identify the choice that best completes the statement or answers the question.

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1 AP Quiz 1 Multiple Choice Identify the choice that best completes the statement or answers the question. 1. Although water is very abundant in most places, it is scarce because: A. it has no alternative uses. B. there is not enough of it to meet all needs at zero cost. C. it is a free good. D. scarce goods in general are not all that costly. E. it is a public good. 2. When the San Francisco city manager faces a complaint that the city council chamber podium is not accessible to individuals with disabilities, he responds that the one million dollar improvement will not happen because that money could be spent building 70 curb ramps. This statement best represents the economic concept of: A. resources are scarce. B. the implicit cost of something is what you must give up to get it. C. how much? is a decision at the margin. D. when markets don't achieve efficiency, government intervention can improve society's welfare. E. there are gains from trade. 3. Grades are low in class and your professor makes available a 10-point extra credit assignment. Most of the students turn in the assignment. This statement best represents the economic concept of: A. the real cost of something is what you must give up to get it. B. how much? is a decision at the margin. C. people usually respond predictably to incentives. D. there are gains from trade. E. markets move toward equilibrium. 4. Which of the following statements is a positive statement? Which is a normative statement? X. The federal minimum wage is increasing to $6.50 an hour. Y. The minimum wage should be high enough that families will not live in poverty. Z: A higher minimum wage typically increases the unemployment rate for teenagers. A. X is positive; Y is normative; Z is positive B. X is positive; Y is positive; Z is positive C. X is normative; Y is positive; Z is normative D. X is normative; Y is normative; Z is normative E. X is positive; Y is normative; Z is normative Figure 3-1: Guns and Butter

2 5. Based on the Guns and Butter Figure 3-1, points A, B, E, and F: A. indicate combinations of guns and butter that society can produce using all of its factors efficiently. B. show that the opportunity cost of more guns increases, but that of more butter decreases. C. indicate that society wants butter more than it wants guns. D. indicate constant costs for guns and increasing costs for butter. E. indicate that society is experiencing many idle resources. Figure 3-3: Consumer and Capital Goods 6. Use the Consumer and Capital Goods Figure 3-3. The movement from Curve 1 to Curve 2 indicates: A. economic growth. B. change from unemployment to full employment. C. a decrease in the level of technology. D. instability. E. the recovery from a recession.

3 Figure 3-5: Tom s Production Possibilities 7. Use the Tom's Production Possibilities Figure 3-5. In the figure, which point or points represent a combination of wine and wheat that is not feasible for Tom to produce at this time? A. A B. A and B C. B and C D. C E. C and D 8. At the point at which it is currently producing, the United States must give up the production of 500 bicycles to produce 20 additional tractors. The opportunity cost of producing 1 tractor is bicycles. A. 5 B. 20 C. 100 D. 125 E. 25

4 Figure 3-4: Production Possibility Curve for Tealand 9. Use the Production Possibility Curve for Tealand Figure 3-4. In the figure, Tealand can only experience point E if the government: A. pays unemployment benefits B. raises taxes. C. raises the age at which workers can retire. D. decreases the use of technology. E. increases barriers to trade with other nations. 10. As a consumer, you decide to go to a movie: A. if the marginal cost of the movie exceeds its marginal benefit. B. if the marginal benefit of the movie exceeds its marginal cost. C. if your inocme will allow you to buy a ticket. D. because all movies are enjoyable. E. if the movie costs more than going to a restaurant. 11. The law of increasing opportunity costs exists because: A. wage increase economies approach full D. the additional output generated by workers employment. decreases ovver time. B. resources are not equally efficient in E. inflation leads to a decrease in purchasing producing different goods. power over time. C. producers are likely to overcharge consumers when there are shortages. 12. In economics, the pleasure or satisfaction received from a product is called: A. marginal cost D. utility B. rational self-interest E. efficiency C. opportunity cost 13. Which of the following would be considered a capital good? I. gold II. employee III. cash register A. I only D. I and II only B. II only E. II and III only

5 C. III only 14. The basic concern of economics is: A. to keep business firms from losing money. B. to prove that capitalism is better than socialism. C. to study the choices people make. D. to use unlimited resources to produce goods and services to satisfy limited wants. E. to increase the amount of wealth in the economy. 15. Margo spends $10,000 on one year's college tuition. The opportunity cost of spending one year in college for Margo is: A. $10,000. B. whatever she would have purchased with the $10,000 instead. C. whatever she would have earned had she not been in college. D. whatever she would have purchased with the $10,000 minus whatever she would have earned had she not been in college. E. whatever she would have purchased with the $10,000 plus whatever she would have earned had she not been in college.