AP Microeconomics

Mr. Tague
Unit 1 Assessment: Basic Economics Concepts

11 – Scarcity
1. Which of the following describes a factor of production that is not fully scarce and that
can be used simultaneously in the production of more than one good?
A. Machines that can produce both clothing and bedsheets
B. Unskilled labor needed to produce all goods
C. Basic knowledge that enhances the organization of all manufacturing
assembly lines
D. Land that is cultivated for two crops by more than one farmer
E. Labor that has received enhanced training in assembly-line work

2. Which of the following statements describes an economy confronting scarcity?

A. If more of one good is produced, less of another good must be produced.
B. An economy can produce a limitless amount of all goods.
C. All individuals are able to satisfy their consumption desires.
D. Scarcity is eliminated by government provision of goods.
E. Scarcity only exists as a problem when there is more than one good to
produce.

3. Assume an economy is using all its available resources efficiently to produce only two
goods, X and Y. As more of good X is produced, what happens to the production of
good Y?
A. The production of good Y also increases.
B. More resources will need to be devoted to producing good Y.
C. Less of good Y is produced as resources move from producing good Y to
producing good X.
D. The economy can only produce more of good X if there is more labor
available.
E. There will be no loss of good Y produced.

4. In which of the following situations is a good NOT scarce?

A. Consumer give up nothing to obtain more of the good.
B. Consumer can purchase as much of the good as they want at its current
market price.
C. Large quantities of the good are available in the marketplace.
D. There is a surplus of the good at some positive price.
E. There is a shortage of the good at some positive price.

5. The study of economics exists because people are confronted with the basic problem
of
A. elasticity
B. negative externality
C. scarcity
D. overabundance
E. monopoly

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AP Microeconomics
Mr. Tague
Unit 1 Assessment: Basic Economics Concepts

12 - Resource Allocation and Economic Systems

6. Assume there are two goods in a market economy. The amount of each good
produced is determined by
A. buyers and sellers’ interactions in the market for each good
B. a central planning agency
C. the desires of households only
D. each citizen's minimum needs for survival
E. popular voting with one vote per citizen

7. Which of the following is associated with a command economy?

A. Competitive product markets
B. Use of resources for private gain
C. Use of available resources to meet all the needs and wants of its citizens
D. Entry of firms into industries with economic profit
E. Public ownership of the means of production

8. In contrast to a market economy, a command economy relies on which of the

following?
A. The private sector in deciding what goods will be produced
B. Private ownership of resources
C. Profits as incentives to make choices
D. The government to allocate resources
E. Supply and demand to determine prices

9. Which of the following is necessary in a well-functioning capitalist economy but not in

a command economy?
A. Centralized decision making
B. Scarcity of resources
C. Monopolies
D. Protection of property rights
E. Positive externalities

10. Assume there are two goods in a market economy. The amount of each good
produced is determined by
A. buyers and sellers’ interactions in the market for each good
B. a central planning agency
C. the desires of households only
D. each citizen's minimum needs for survival
E. popular voting with one vote per citizen

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AP Microeconomics
Mr. Tague
Unit 1 Assessment: Basic Economics Concepts

13 - Production Possibilities Curve

11.

Of the feasible and efficient points on the production possibilities curve (PPC) above,
producing at which point will lead to the most economic growth in the future?
A. Point M
B. Point N
C. Point R
D. Point J
E. Point S

12. An economy produces two goods: X and Y. Its production possibilities curve is linear
with the intercept on the Y axis at 1,000 units and the intercept on the X axis at 100
units. Which of the following statements is correct?
A. There is an increasing opportunity cost of producing good X, beginning with 1
unit of X costing 0.1 unit of Y.
B. There is an increasing opportunity cost of producing good Y but not of
producing good X, which has a constant opportunity cost.
C. There is a constant opportunity cost with each unit of good X costing 10 units
of good Y.
D. There is a constant opportunity cost with 10 units of good X costing 1 unit of
good Y.
E. With a linear production possibilities curve, total production of goods X and Y
will be the same at each point on the curve.

13. Assume an economy uses one input, labor, to produce two goods, X and Y, with
constant opportunity cost. Which of the following would cause a parallel shift to the right
of the production possibilities curve (PPC)?
A. An increase in the productivity of labor with respect to producing good X
B. An increase in the amount of labor available for production
C. A reduction in the unemployment of labor
D. An increase in the demand for good X and good Y
E. A change in consumer tastes from good Y to good X

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AP Microeconomics
Mr. Tague
Unit 1 Assessment: Basic Economics Concepts

14.

The diagram above shows an economy's current production possibilities curve for
capital goods and consumer goods. If society chooses point B over point A, society is
choosing
A. more future consumption in exchange for less current consumption
B. more current capital goods in exchange for less future consumption
C. more future and current consumption
D. less future consumption in exchange for more current consumption
E. less current capital goods in exchange for greater future consumption

15. Improvements in technology for producing all goods must result in

A. an inward shift in the production possibilities curve
B. an outward shift in the production possibilities curve
C. a flatter production possibilities curve
D. a steeper production possibilities curve
E. greater unemployment of labor

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AP Microeconomics
Mr. Tague
Unit 1 Assessment: Basic Economics Concepts

14 - Comparative Advantage and Trade

16. Cindy and Martin both sew t-shirts in a small factory. Using the same resources,
Martin can sew twelve t-shirts and Cindy can sew nine t-shirts in one day. Which of the
following can be concluded from the given information?
A. Martin has a higher opportunity cost of sewing t-shirts than Cindy does.
B. Cindy has a comparative advantage in sewing t-shirts.
C. Martin has a comparative advantage in sewing t-shirts.
D. Martin has an absolute advantage in sewing t-shirts.
E. Cindy has an absolute advantage in sewing t-shirts.

17. Which of the following statements regarding specialization and trade is true?
A. With specialization and trade, a country’s production possibilities curve shifts
out, showing an increase in productive capacity.
B. With specialization and trade, a country will produce a combination of goods
beyond its production possibilities curve.
C. To gain from trade, countries specialize in producing goods and services in
which they have an absolute advantage.
D. With specialization and trade, a country can consume beyond its production
possibilities curve.
E. A country must have both the comparative and the absolute advantage in a
product to specialize and gain from trade.

18. In the country Beta it takes two hours of labor to produce a unit of tea and four hours
of labor to produce a unit of bread. In the country Zeta it takes three hours of labor to
produce a unit of tea and nine hours of labor to produce a unit of bread. Which of the
following is true?
A. Country Zeta has an absolute advantage in producing both tea and bread.
B. Country Zeta has an absolute advantage and a comparative advantage in
producing tea.
C. Country Beta has an absolute advantage and a comparative advantage in
producing tea.
D. Country Beta has the lower opportunity cost in producing bread and therefore
a comparative advantage in producing bread.
E. Country Beta, with trade, will export both tea and bread to country Zeta.

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AP Microeconomics
Mr. Tague
Unit 1 Assessment: Basic Economics Concepts

19. Both Amy and Brad produce and consume apple pie and ice cream. In one hour,
Brad makes five apple pies or ten gallons of ice cream while Amy makes fifteen apple
pies or fifteen gallons of ice cream. Based on the above information, one can correctly
conclude that
A. Brad has an absolute advantage in making ice cream and will sell ice cream to
Amy
B. Brad has a comparative advantage in making ice cream and will sell ice cream
to Amy
C. Brad does not have a comparative advantage in making either good and will
not trade with Amy
D. Brad has an absolute advantage in making apple pies but a comparative
advantage in making ice cream
E. Brad’s opportunity cost of making ice cream is higher than Amy’s

20.

The table above shows the amount of labor required to produce a unit of corn and a unit
of shoes in Brazil and Spain. If both countries have equal numbers of workers, what
pattern of international trade between Brazil and Spain is most likely to emerge?
A. Brazil will export both corn and shoes.
B. Spain will export both corn and shoes.
C. No mutually beneficial trade can occur.
D. Brazil will export corn and import shoes.
E. Brazil will import corn and export shoes.

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AP Microeconomics
Mr. Tague
Unit 1 Assessment: Basic Economics Concepts

15 - Cost-Benefit Analysis
21. Using cost-benefit analysis, a local government would decide to build a new bridge if
A. The additional tax paid by an individual resident is greater than the additional
benefit of building the bridge for all residents.
B. The toll paid by an individual resident crossing the bridge is less than the
resident’s benefit from crossing the bridge.
C. The total costs of building the bridge are less than the total benefits from
building the bridge.
D. The total costs of building the bridge are greater than the total benefits from
building the bridge.
E. Total costs are at a minimum and total benefits are at a maximum.

22. Assume a worker can either cut grass or wash windows in a given day. It takes 5
hours to mow a one-acre lawn and 2.5 hours to wash all the windows in a house. When
a worker chooses to wash the windows of four houses in a neighborhood, what is the
opportunity cost of this decision?
A. The pay the worker receives for washing the windows in the four houses
B. The pay the worker would receive for cutting one lawn
C. Cutting the grass at the same four houses
D. The pay the worker would have received from cutting the grass at two houses
E. The pay the worker would receive for cutting .25 lawns

23.

The table above shows the costs and benefits for new construction projects the
government is considering. Based on these costs and benefits, which of the
construction projects should the government undertake?
A. Widening existing highways
B. Building new highways
C. Building a new bridge
D. Building a new tunnel
E. Expanding an existing airport

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AP Microeconomics
Mr. Tague
Unit 1 Assessment: Basic Economics Concepts

24. All of the following are included in computing the opportunity cost of attending
college EXCEPT
A. interest paid on student loans
B. wages the student gave up to attend college
C. money spent on college tuition
D. money spent on clothing expenses
E. money spent on books and supplies

25. Using cost-benefit analysis, a local government would decide to build a new bridge if
A. The additional tax paid by an individual resident is greater than the additional
benefit of building the bridge for all residents.
B. The toll paid by an individual resident crossing the bridge is less than the
resident’s benefit from crossing the bridge.
C. The total costs of building the bridge are less than the total benefits from
building the bridge.
D. The total costs of building the bridge are greater than the total benefits from
building the bridge.
E. Total costs are at a minimum and total benefits are at a maximum.

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AP Microeconomics
Mr. Tague
Unit 1 Assessment: Basic Economics Concepts

16 - Marginal Analysis and Consumer Choice

26. Assume a consumer is spending all her income on two goods: X and Y. At the current
consumption combination of the two goods, if the marginal utility per dollar spent on the last
unit of good X exceeds that of the marginal utility per dollar spent on the last unit of good Y,
what should the consumer do to maximize utility?
A. Purchase more units of X and more units of Y.
B. Decrease the price of good X.
C. Purchase more units of X and less units of Y.
D. Increase income to buy more of both good Y and good X.
E. Nothing; utility is maximized at current consumption bundles.

27. Assume the price of a candy bar is $2 and the price of a bag of chips is $3. Assume
Lilly’s marginal utility from consuming an additional candy bar is 10 utils and her marginal
utility from consuming an additional bag of chips is 12 utils. If Lilly is spending her fixed
weekly allowance on candy bars and bags of chips, which of the following actions will
maximize Lilly’s total utility?
A. Buying more candy bars and bags of chips
B. Buying more candy bars and fewer bags of chips
C. Buying fewer candy bars and more bags of chips
D. Buying fewer candy bars and bags of chips
E. Buying the same number of candy bars and bags of chips

28. The additional satisfaction received from consuming an additional unit of a good is
called the
A. marginal utility
B. marginal product
C. average product
D. average utility
E. total utility

29. Carlos has a van with 20 seats and charges $10 per person per ride to the airport from
downtown. Carlos’ cost of the trip is $140 for any number of passengers. On one trip,
Carlos has 19 seats filled when a person offers him $5 for the last seat. Should Carlos
accept the offer?
A. No, since the $5 fare offered is below his average cost of $7.
B. No, since the average variable cost is greater than $5.
C. No, since it is illegal to charge different prices for the same service.
D. Yes, since the marginal benefit exceeds the marginal cost.
E. Yes, since his total revenue exceeds his total cost by $5.

30. Marginal analysis suggests that an individual will consume one additional unit of a good
if the
A. sunk cost can be recovered
B. total benefit is less than the total cost
C. total benefit is greater than the total cost
D. additional benefit is less than the additional cost
E. additional benefit is greater than the additional cost

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AP Microeconomics
Mr. Tague
Unit 1 Assessment: Basic Economics Concepts

FRQ #1

The table below shows the total benefit, in dollars, that Andrew derives from
consuming two goods, cheeseburgers and Good J.

Total
Total Quant
Quantity of Bene
Benefit of ity of
Cheesebur fit of
Cheesebur Good
gers Goo
gers J
dJ
0 $0 0 $0
1 $40 1 $30
2 $70 2 $50
3 $90 3 $65
4 $100 4 $75
5 $105 5 $80
6 $105 6 $83
Andrew has a limited weekly income of $65, and he spends it all on
cheeseburgers and Good J. Assume the price of each cheeseburger is $10 and
the price of Good J is $5 per unit.

(a) Calculate Andrew’s consumer surplus from the second unit of Good J. Show
your work.

(b) Identify the quantity of cheeseburgers and the quantity of Good J that will
maximize Andrew’s total benefit given his weekly income. Explain using marginal
analysis.

(c) If Andrew’s weekly income increases from $65 to $75, would Andrew be able
to buy 5 cheeseburgers and 6 units of Good J? Explain using numbers.

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AP Microeconomics
Mr. Tague
Unit 1 Assessment: Basic Economics Concepts

FRQ #2
The table below shows the total cost and total benefit of advertisements placed
by AZY Foods, a firm in the retail food market.

Number of Total Cost Total Benefit

Advertisements ($) ($)
1 300 1,200
2 500 2,200
3 800 3,000
4 1,300 3,600
5 2,100 4,000
6 3,000 4,200
7 4,100 4,200
(a) Calculate the total net benefit of placing three advertisements. Show your
work.

(b) Calculate the marginal net benefit of the third advertisement. Show your
work.

(c) What is the optimal number of advertisements placed by AZY Foods?

Explain using marginal analysis.

(d) Suppose over the next year the marginal benefit that AZY Foods receives
from each advertisement increases by $300. Identify the optimal number of
advertisements.

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