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AP Macroeconomics Unit 1 Basic Economic Concepts Questions

Connect scarcity and PPC analysis with comparative advantage, trade, demand, supply, and market equilibrium across the first AP Macroeconomics unit.

Syllabus
Effective Fall 2022
Course
AP Macroeconomics

Exam points

  • explain how scarcity forces choices and resource-allocation decisions
  • use PPCs to classify efficiency, calculate opportunity cost and explain shifts or economic growth
  • determine absolute and comparative advantage and evaluate specialization, terms of trade and gains from trade
  • apply the inverse demand relationship and positive supply relationship to market curves
  • find market equilibrium and diagnose shortages, surpluses and the resulting price adjustment

Covered syllabus points

1.1 Scarcity1.2 Opportunity Cost and the Production Possibilities Curve (PPC)1.3 Comparative Advantage and Gains from Trade1.4 Demand1.5 Supply1.6 Market Equilibrium, Disequilibrium, and Changes in Equilibrium

Question 1

[Maximum number: 1]

Economics is the study of

A

business.

B

government regulation.

C

central planning.

D

how societies manage their scarce resources.

E

society, politics, and government combined.

Question 2

[Maximum number: 1]

Assume that in the country of Zeta, the civilian noninstitutional population aged 16 and over is 1,000,000. The labor force participation rate is 70%, the unemployment rate is 9%, and the natural rate of unemployment is 5\%.

Consumer goods and capital goods are produced in the country of Zeta. Draw a correctly labeled graph of the production possibilities curve for Zeta. Indicate a point, labeled A, that represents the current state of Zeta's economy.

Question 3

[Maximum number: 4]

Sweden and Norway use equal quantities of resources to produce food and capital goods. The table below shows the maximum possible production of food OR capital goods for each country.

Table for Question 3 — AP Macroeconomics

Question (a)

(a)

Draw a correctly labeled graph of the production possibilities curve for Sweden. Place food on the horizontal axis and capital goods on the vertical axis. Plot the relevant numerical values on the graph.

[ 1 ]

Question (b)

(b)

On your graph in part (a), indicate the following.

[ 1 ]

Question (i)

(i)

A point that represents an efficient level of production, labeled E

Question (ii)

(ii)

A point that represents an inefficient level of production, labeled I

Question (iii)

(iii)

A point that represents an unattainable level of production, labeled U

Question (c)

(c)

Assume Sweden moves from producing 20 units of food and 60 units of capital goods to producing 30 units of food and 40 units of capital goods. What will happen to economic growth in Sweden in the future?

[ 1 ]

Question (d)

(d)

Which country has the comparative advantage in the production of capital goods? Explain.

[ 1 ]

Question (e)

(e)

Based on the table above, identify a specific number of units of capital goods that could be traded for 10 units of food and be mutually beneficial.

[ 1 ]

Question 4

[Maximum number: 1]

Which statement best describes the law of demand?

A

When price increases, demand decreases.

B

When price increases, demand increases.

C

Price and quantity demanded are inversely related.

D

Price and quantity demanded are directly related.

E

The demand curve is always upward sloping.

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