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AP Macro

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Unit 1

1.8 MC Answers and Review

6 min read•december 3, 2021

Dalia Savy

AP Macroeconomics 💶

99 resources

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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 Macro Unit 1 Multiple Choice Questions.

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Facts about the test: The AP Macroeconomics 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 Macroeconomics Course and Exam Description, the formatting on the exam may be different.

1. Which is true for every economy, no matter its economic system?

A. Every economy decides how to distribute equal income to all citizens.

B. Every economy decides how to maximize trade with foreign allies.

C. Every economy decides what to produce and how to produce them.

D. Every economy must decide how to maximize the production of consumer goods and decrease the production of capital goods.

Answer: No matter the economic system, an economy must decide what to produce. Many factors are involved in this decision: politics, geography, population, etc.

📄 Study AP Macroeconomics, Unit 1.1: Scarcity

2. Which of the following is an example of human capital?

A. investment money

B. job training

C. factory

D. tools and machinery

Answer: Human capital is the knowledge, training, education habits and experience a person develops over time that allows them to perform job functions.

3. If the production possibilities curve (PPC) is bowed out, it exhibits:

A. increasing opportunity costs

B. decreasing opportunity costs

C. no opportunity costs

D. constant opportunity costs

Answer: With increasing opportunity costs, the resources used to produce items are dissimilar. In order to produce more of one good, an increasing amount of the other good will have to be sacrificed.

📄 Study AP Macroeconomics, Unit 1.2: Opportunity Cost and the Production Possibilities Curve (PPC)

4. If you decide to go to the movies instead of studying for an upcoming test, the time you would have spent studying is known as your

A. time value of money

B. opportunity cost

C. constant cost scenario

D. differential possibilities outcome

Answer: Opportunity cost: the next best thing to the decision you made; what you have to give up in order to do/choose something else

📄 Study AP Macroeconomics, Unit 1.1: Scarcity

5. A point on the PPC represents

A. an impossible outcome, give current resources

B. an inefficient use of resources

C. a constant opportunity cost

D. an efficient use of resources

Answer: Any point on the PPC is deemed an efficient use of resources. (inside is inefficient, outside is impossible given current resources)

📄 Study AP Macroeconomics, Unit 1.2: Opportunity Cost and the Production Possibilities Curve (PPC)

6. If two countries were to specialize and trade, the same producer can have the comparative advantage in producing both goods.

A. True

B. False

C. Sometimes

D. Always

Answer: One one producer can have comparative advantage in producing a good when engaged in trade with another producer. The producer who has comparative advantage has the lowest per unit opportunity cost in producing that good.

📄 Study AP Macroeconomics, Unit 1.3: Comparative Advantage and Trade

7. If the technology used to produce tacos improves at the same time as tacos become a more popular food choice for consumers, which of the following will definitely occur?

A. equilibrium quantity will remain the same

B. equilibrium price will increase

C. equilibrium quantity will decrease

D. equilibrium quantity will increase

Answer: This scenario shows a double shift, where supply and demand both increase at the same time. In a double shift scenario, either price or quantity will be indeterminate. In this case, after the double shift price is indeterminate, but quantity has increased. (when in doubt, graph it out!)

📄 Study AP Macroeconomics, Unit 1.6: Market Equilibrium, Disequilibrium, and Changes in Equilibrium

8. You produce bananas and mangoes. If producing an extra banana required you to always give up the same amount of mangoes, your PPC would be

A. a straight line

B. bowed outward

C. bowed inward

D. infinite

Answer: Since you always have to give up the same amount of mangoes to produce an additional banana, your PPC would exhibit constant opportunity costs, which would be a straight line.

📄 Study AP Macroeconomics, Unit 1.2: Opportunity Cost and the Production Possibilities Curve (PPC)

9. If the price for a good is greater than the equilibrium price in that market, there is a(n)

A. shortage

B. surplus

C. trade deficit

D. alleviated demand

Answer: When the price of a good is higher than equilibrium, supply will be greater than demand, creating disequilibrium, or a surplus.

📄 Study AP Macroeconomics, Unit 1.6: Market Equilibrium, Disequilibrium, and Changes in Equilibrium

10. A leftward shift of the supply curve for coffee beans could be due to which of the following?

A. consumers' preference for tea over coffee

B. an increase in the price of tea and hot cocoa

C. a drought in a key production area of coffee beans

D. a decrease in the price of coffee

Answer: A drought in a key production area of coffee beans would limit producers' access to a key resource - the plants that grow coffee beans.

📄 Study AP Macroeconomics, Unit 1.5: Supply

11. All of the following are factors of production EXCEPT:

A. bonds

B. physical capital

C. entrepreneurship

D. land

Answer: Factors of production: land, labor, capital, entrepreneurship

12. What is the most fundamental issue that is addressed in economics?

A. money and inequality

B. the stock market and its fluctuations

C. government intervention in private markets

D. the use of scarce resources

Answer: Scarcity and the need to consider choice and opportunity costs/trade-offs are at the heart of economics.

📄 Study AP Macroeconomics, Unit 1.1: Scarcity

13. Bella and Urvi produce balloons. Bella can produce two balloons per hour, and Urvi can produce 12 balloons per hour. Who has the absolute advantage in producing balloons?

A. Urvi

B. Bella

C. Both

D. Neither

Answer: The producer with the absolute advantage can produce more of the good OR use less resources to produce the good.

📄 Study AP Macroeconomics, Unit 1.3: Comparative Advantage and Trade

14. If two countries produce and specialize according to their comparative advantages, and then decide to engage in trade, which of the following must be true?

A. One nation would gain from trade.

B. One nation would lose from trade.

C. Both nations could consume outside of their individual PPCs.

D. Both nations would lose from trade.

Answer: When nations specialize and engage in trade, they both become better off because they can consume beyond their original individual PPCs.

📄 Study AP Macroeconomics, Unit 1.2: Opportunity Cost and the Production Possibilities Curve (PPC)

15. Scarcity is when

A. available resources exceed wants

B. wants exceed available resources

C. wants are limited to essential goods

D. resources are used efficiently

Answer: Scarcity: the state of being scarce or in short supply; shortage