AP Macroeconomics Unit 1 Practice Test & Exam | 27 Questions

1. Country Alpha produces only two goods: microchips and textiles. The country's production possibilities curve (PPC) is concave (bowed out) relative to the origin. If Country Alpha moves along the curve to increase microchip production by constant successive amounts, which of the following accurately describes the change in the opportunity cost and the economic rationale behind it?

(A)The opportunity cost remains constant because the factors of production are assumed to be perfectly substitutable between microchips and textiles.(B)The opportunity cost decreases because the country benefits from economies of scale as it specializes further in microchip production.(C)The opportunity cost increases because resources that are better suited for textile production are progressively reallocated to microchip production, where they are less efficient.(D)The opportunity cost increases initially but then decreases as the economy reaches the point of full employment of all resources.

2. Beef and leather are commercially produced as complements in production. Suppose a new health study significantly increases the consumer demand for beef. Assuming all other factors remain constant, how will this change affect the market for leather?

(A)The supply of leather will increase, leading to a lower equilibrium price and higher equilibrium quantity.(B)The supply of leather will decrease, leading to a higher equilibrium price and lower equilibrium quantity.(C)The demand for leather will increase, leading to a higher equilibrium price and higher equilibrium quantity.(D)The quantity of leather supplied will increase due to a movement along the supply curve, leading to a higher equilibrium price.

Refer to the figure below.

3. [Skill: 2.A | Topic: 1.4] Assume that tablets and laptops are substitute goods in the consumer electronics market. If the market price of laptops increases significantly, which of the following best describes the resulting change in the market for tablets, and what is the economic reasoning behind it?

(A)There will be a movement downward and to the right along the demand curve for tablets because the quantity demanded increases as price falls.(B)The demand curve for tablets will shift to the right because consumers will switch from the more expensive laptops to tablets.(C)The demand curve for tablets will shift to the left because consumers have less disposable income after buying laptops.(D)There will be a movement upward and to the left along the demand curve for tablets because the price of a related good has changed.

4. [Skill: 3.A | Topic: 1.2] The following table shows the production possibilities for an economy that produces only two goods: Capital Goods and Consumer Goods. | Combination | Capital Goods | Consumer Goods | | :--- | :--- | :--- | | A | 0 | 100 | | B | 10 | 90 | | C | 20 | 70 | | D | 30 | 40 | | E | 40 | 0 | Based on the table, what is the opportunity cost of increasing the production of capital goods from 20 units to 30 units, and what does the data suggest about the shape of the production possibilities curve (PPC)?

(A)30 units of consumer goods; the PPC is a straight line.(B)30 units of consumer goods; the PPC is bowed-out from the origin.(C)40 units of consumer goods; the PPC is bowed-out from the origin.(D)70 units of consumer goods; the PPC is bowed-in toward the origin.

5. [Skill: 1.A | Topic: 1.1] A small island nation has a fixed amount of fertile land. The government is currently debating whether to use the land to establish a protected national park to promote eco-tourism or to develop a large-scale commercial farm to increase food exports. Which of the following best explains why the nation must choose between these two options?

(A)The scarcity of land forces the society to make a choice between competing objectives.(B)The law of demand ensures that the price of land will increase if both projects are started.(C)A command economy structure would eliminate the need for the government to make such a decision.(D)The nation has an absolute advantage in both tourism and agriculture, making the choice unnecessary.

Questions 1-3 refer to the graph below.

6. Which of the following statements is true regarding the economy depicted in the graph?

(A)The movement from Point A to Point B incurs no opportunity cost.(B)At Point C, the economy is using all of its resources efficiently.(C)The economy can currently produce at Point D if it specializes and trades.(D)Production at Point A is efficient, but production at Point C is inefficient.

7. A movement from Point A to Point B along the curve illustrates which of the following?

(A)An increase in the labor force(B)An improvement in technology for producing consumer goods(C)A trade-off, resulting in an increase in consumer goods and a decrease in capital goods(D)A decrease in unemployment as the economy moves toward full employment

8. Which of the following events would most likely cause the entire Production Possibilities Curve to shift outward?

(A)A decision to produce more capital goods and fewer consumer goods.(B)A decrease in the unemployment rate.(C)A widespread improvement in the education and skills of the labor force.(D)A shift in consumer preferences toward consumer goods.

9. The fundamental problem of economics is best described as:

(A)The challenge of eliminating poverty and ensuring equitable distribution of income.(B)The scarcity of resources relative to unlimited human wants.(C)The need to control inflation and unemployment in a market economy.(D)The difficulty in determining market prices in the absence of government regulation.

10. An economy produces two goods: pizza and pasta. If it moves from producing 100 pizzas and 0 pasta to producing 80 pizzas and 40 pasta, what is the opportunity cost of one unit of pasta?

(A)2 pizzas(B)1/2 of a pizza(C)20 pizzas(D)40 pastas

Questions 6-9 refer to the table below, which shows the maximum number of cars or computers that two countries, Artizia and Bolandia, can produce in one day.

11. Upland has an absolute advantage in the production of which good(s)?

(A)Wheat only(B)Cloth only(C)Both wheat and cloth(D)Neither wheat nor cloth

12. What is the opportunity cost for Lowland to produce one ton of wheat?

(A)1/3 of a roll of cloth(B)3 rolls of cloth(C)4 rolls of cloth(D)80 rolls of cloth

13. Which country has a comparative advantage in the production of cloth, and why?

(A)Upland, because its opportunity cost of 1/4 ton of wheat is less than Lowland's 1/3 ton of wheat.(B)Upland, because it can produce more total cloth (200 > 120).(C)Lowland, because its opportunity cost of 3 rolls of cloth is less than Upland's 4 rolls of cloth.(D)Lowland, because it sacrifices less wheat production overall.

14. If the countries specialize and trade, which of the following is a mutually beneficial term of trade?

(A)1 ton of wheat for 2 rolls of cloth(B)1 ton of wheat for 3.5 rolls of cloth(C)1 ton of wheat for 5 rolls of cloth(D)1 roll of cloth for 1 ton of wheat

15. The law of demand states that, ceteris paribus, an increase in the price of a good will cause:

(A)An increase in the demand for that good.(B)A decrease in the demand for that good.(C)An increase in the quantity demanded of that good.(D)A decrease in the quantity demanded of that good.

16. Which of the following would cause the demand curve for gasoline to shift to the right?

(A)An increase in the price of gasoline.(B)A decrease in the price of cars, a complement to gasoline.(C)A technological innovation that improves the fuel efficiency of cars.(D)An increase in the price of crude oil, a key input in gasoline production.

17. A new automated technology for manufacturing smartphones is introduced. This change will most likely cause which of the following in the market for smartphones?

(A)The supply curve to shift to the left.(B)The supply curve to shift to the right.(C)The demand curve to shift to the left.(D)A movement up along the existing supply curve.

18. The relationship between the price of a good and the quantity supplied by producers is typically:

(A)Inverse, as shown by a downward-sloping supply curve.(B)Direct, as shown by an upward-sloping supply curve.(C)Unrelated, as supply is determined by production costs, not price.(D)Constant, as shown by a vertical supply curve.

Questions 14-17 refer to the graph below, which shows the market for coffee.

19. In the market shown, what is the equilibrium price and quantity?

(A)Price = 6 dollars, Quantity = 150(B)Price = 4 dollars, Quantity = 100(C)Price = 2 dollars, Quantity = 50(D)Price = 4 dollars, Quantity = 150

20. If the government imposes a price ceiling of 2 dollars in this market, what will be the result?

(A)A surplus of 100 units.(B)A surplus of 50 units.(C)A shortage of 100 units.(D)A shortage of 50 units.

21. If the current market price is 6 dollars, which of the following statements is true?

(A)The quantity demanded exceeds the quantity supplied, and the price will tend to fall.(B)The quantity supplied exceeds the quantity demanded, and the price will tend to fall.(C)The quantity demanded exceeds the quantity supplied, and the price will tend to rise.(D)The quantity supplied exceeds the quantity demanded, and the price will tend to rise.

22. Suppose a new medical study reveals that drinking coffee provides significant health benefits. At the same time, a severe frost damages a large portion of the coffee bean crop. Which of the following best describes the likely impact on the equilibrium price and quantity of coffee?

(A)Price will increase; quantity is indeterminate.(B)Price will decrease; quantity will increase.(C)Price is indeterminate; quantity will increase.(D)Price will increase; quantity will decrease.

23. If tacos are a normal good, an increase in consumer income will result in:

(A)A movement down along the demand curve for tacos.(B)A rightward shift of the demand curve for tacos.(C)A leftward shift of the demand curve for tacos.(D)No change in the demand for tacos.

24. Assume the market for cotton is in equilibrium. A new government subsidy is granted to cotton farmers. This will cause the equilibrium price and quantity of cotton to change in which of the following ways?

(A)Price will increase, Quantity will decrease.(B)Price will decrease, Quantity will increase.(C)Price will increase, Quantity will increase.(D)Price will decrease, Quantity will decrease.

25. An economy is operating at a point inside its production possibilities curve. This signifies that:

(A)The economy is experiencing economic growth.(B)The economy is using its resources inefficiently or is experiencing unemployment.(C)The opportunity cost of producing both goods is zero.(D)The economy has reached its maximum potential output.

AP Macroeconomics Unit 1: Basic Economic Concepts Practice Exam

Exam Details

A. Multiple-Choice Questions (25 Questions)

B. Short Answer Questions (2 Questions)

AP Macroeconomics Unit 1: Basic Economic Concepts Practice Exam

Exam Details

A. Multiple-Choice Questions (25 Questions)

B. Short Answer Questions (2 Questions)