AP Macro Exam Review 2025
Questions and Answers
Section 1 ~ Module 1-4 - ✔✔
market economy - ✔✔Economic decisions are made by individuals or the open market.
command economy - ✔✔An economic system in which the government controls a
country's economy.
marginal analysis - ✔✔analysis that involves comparing marginal benefits and marginal
costs. What do you gain/lose from doing this?
What are the 4 main factors of supply. Give an example of each - ✔✔land ~ oranges to
make orange juice
labor ~ A mcdonald's employee
Capital ~ The Grill to cook food
Entrepreneurship ~ The owner of Mcdonalds franchise
Opportunity Cost - ✔✔Cost of the next best alternative use of money, time, or resources
when one choice is made rather than another.
Ex) If I do homework, the opportunity cost is not being able to play video games.
COPYRIGHT © 2025 BY OLIVIA WEST, ALL RIGHTS RESERVED 1
, Positive Economics - ✔✔the branch of economic analysis that describes the way the
economy actually works
Normative Economics - ✔✔The part of economics involving value judgments about
what the economy should be like; focused on which economic goals and policies should
be implemented; policy economics.
Business Cycle - ✔✔a period of macroeconomic expansion followed by a period of
contraction
Productive efficiency - ✔✔a situation in which a good or service is produced at the
lowest possible cost
Allocative efficiency - ✔✔A state of the economy in which production is in accordance
with consumer preferences; in particular, every good or service is produced up to the
point where the last unit provides a marginal benefit to society equal to the marginal
cost of producing it
Specialization - ✔✔the concentration of the productive efforts of individuals and firms
on a limited number of activities
Comparative Advantage - ✔✔the ability to produce a good at a lower opportunity cost
than another producer
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
Terms Of Trade - ✔✔indicate the rate at which one good can be exchanged for another
Section 2 ~ Module 5-9 - ✔✔
Competitive market - ✔✔a market with many buyers and sellers trading identical
products so that each buyer and seller is a price taker
COPYRIGHT © 2025 BY OLIVIA WEST, ALL RIGHTS RESERVED 2
Questions and Answers
Section 1 ~ Module 1-4 - ✔✔
market economy - ✔✔Economic decisions are made by individuals or the open market.
command economy - ✔✔An economic system in which the government controls a
country's economy.
marginal analysis - ✔✔analysis that involves comparing marginal benefits and marginal
costs. What do you gain/lose from doing this?
What are the 4 main factors of supply. Give an example of each - ✔✔land ~ oranges to
make orange juice
labor ~ A mcdonald's employee
Capital ~ The Grill to cook food
Entrepreneurship ~ The owner of Mcdonalds franchise
Opportunity Cost - ✔✔Cost of the next best alternative use of money, time, or resources
when one choice is made rather than another.
Ex) If I do homework, the opportunity cost is not being able to play video games.
COPYRIGHT © 2025 BY OLIVIA WEST, ALL RIGHTS RESERVED 1
, Positive Economics - ✔✔the branch of economic analysis that describes the way the
economy actually works
Normative Economics - ✔✔The part of economics involving value judgments about
what the economy should be like; focused on which economic goals and policies should
be implemented; policy economics.
Business Cycle - ✔✔a period of macroeconomic expansion followed by a period of
contraction
Productive efficiency - ✔✔a situation in which a good or service is produced at the
lowest possible cost
Allocative efficiency - ✔✔A state of the economy in which production is in accordance
with consumer preferences; in particular, every good or service is produced up to the
point where the last unit provides a marginal benefit to society equal to the marginal
cost of producing it
Specialization - ✔✔the concentration of the productive efforts of individuals and firms
on a limited number of activities
Comparative Advantage - ✔✔the ability to produce a good at a lower opportunity cost
than another producer
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
Terms Of Trade - ✔✔indicate the rate at which one good can be exchanged for another
Section 2 ~ Module 5-9 - ✔✔
Competitive market - ✔✔a market with many buyers and sellers trading identical
products so that each buyer and seller is a price taker
COPYRIGHT © 2025 BY OLIVIA WEST, ALL RIGHTS RESERVED 2
