AP Microeconomics Unit 1.Final Exam 2026\2027.
Production possibilities curve (PPC)
A graph that shows the various combinations of output that the economy can produce given
the available factors of production and the available production technology.
Trade-off
all the alternatives that we sacrifice when we make a decision
Opportunity cost
Cost of the next best alternative use of money, time, or resources when one choice is made
rather than another
Economics
study of human decision making and the role of scarcity in choice
Marginal analysis
analysis that involves comparing marginal benefits and marginal costs
Marginal
"additional"
Marginal benefit (MB)
the additional satisfaction or utility that a person receives from consuming an additional unit
of a good or service
Marginal cost (MC)
The additional cost incurred from the consumption of the next unit of a good or service
Resources
all things used in producing goods and services (factors of production)
Land resources
natural resources
Labor
Human effort directed toward producing goods and services
Physical capital
resource (including technology) used to produce other goods and services
Entrepreneurship
, AP Microeconomics Unit 1.Final Exam 2026\2027.
leaders that combine the factors of production and takes the initiative, innovates, and bears
risk for profit
Human capital
skills and knowledge gained by a worker through education and experience
Specialization
concentrating on one specific good or service
Per-unit opportunity cost
opportunity cost divided by units gained
output problems = other goes over (OOO)
input problems = other goes under (IOU)
Absolute advantage
the ability of an individual, a firm, or a country to produce more of a good or service than
competitors, using the same amount of resources
Trade
exchange of goods and services
Microeconomics
decisions made by individuals (consumers & producers) in product and resource markets
Scarcity
when human desires (unlimited) is greater than resources (limited) and is the reason why
decisions are made
What are the three production questions
WHAT to produce
HOW to produce
FOR WHOM to produce
Traditional economy
production is based on customs and traditions and economic roles are typically passed
down from one generation to the next
Command economy
government answers the three economic questions and controls the factors of production
Market economy
Production possibilities curve (PPC)
A graph that shows the various combinations of output that the economy can produce given
the available factors of production and the available production technology.
Trade-off
all the alternatives that we sacrifice when we make a decision
Opportunity cost
Cost of the next best alternative use of money, time, or resources when one choice is made
rather than another
Economics
study of human decision making and the role of scarcity in choice
Marginal analysis
analysis that involves comparing marginal benefits and marginal costs
Marginal
"additional"
Marginal benefit (MB)
the additional satisfaction or utility that a person receives from consuming an additional unit
of a good or service
Marginal cost (MC)
The additional cost incurred from the consumption of the next unit of a good or service
Resources
all things used in producing goods and services (factors of production)
Land resources
natural resources
Labor
Human effort directed toward producing goods and services
Physical capital
resource (including technology) used to produce other goods and services
Entrepreneurship
, AP Microeconomics Unit 1.Final Exam 2026\2027.
leaders that combine the factors of production and takes the initiative, innovates, and bears
risk for profit
Human capital
skills and knowledge gained by a worker through education and experience
Specialization
concentrating on one specific good or service
Per-unit opportunity cost
opportunity cost divided by units gained
output problems = other goes over (OOO)
input problems = other goes under (IOU)
Absolute advantage
the ability of an individual, a firm, or a country to produce more of a good or service than
competitors, using the same amount of resources
Trade
exchange of goods and services
Microeconomics
decisions made by individuals (consumers & producers) in product and resource markets
Scarcity
when human desires (unlimited) is greater than resources (limited) and is the reason why
decisions are made
What are the three production questions
WHAT to produce
HOW to produce
FOR WHOM to produce
Traditional economy
production is based on customs and traditions and economic roles are typically passed
down from one generation to the next
Command economy
government answers the three economic questions and controls the factors of production
Market economy
