AP MACROECONOMICS
UNIT 1 PRACTICE TEST
Basic Economic Concepts
25 questions — modeled on official AP question styles and stimulus formats.
Give yourself 30 minutes. Answers and explanations begin on a separate page after the questions.
Multiple Choice Questions
1. Economics is best defined as the study of:
A) How governments should regulate private businesses
B) How individuals and societies allocate scarce resources among unlimited wants and needs
C) How to maximize a single firm's profit regardless of resource limits
D) How stock markets determine share prices
E) How international treaties are negotiated
2. Which of the following is NOT one of the four factors of production?
A) Land
B) Labor
C) Capital
D) Entrepreneurship
E) Currency
3. A student decides to spend Saturday studying for an exam instead of working a shift at their part-time job, which
would have paid $80. The opportunity cost of studying is:
A) The time spent studying
B) $80, the value of the next-best alternative given up
C) The cost of the textbook used to study
D) Zero, since studying does not involve a monetary transaction
E) The average of all possible alternatives, not just the best one
4. On a Production Possibilities Curve (PPC), a point located inside the curve represents:
A) An efficient use of all available resources
B) An unattainable combination of output given current resources and technology
C) An inefficient use of resources, such as unemployment or underutilized capacity
D) The result of economic growth
E) A combination that violates the law of supply
5. Which of the following would cause an entire Production Possibilities Curve to shift outward?
A) A decrease in the unemployment rate, moving the economy from a point inside the curve to a point on the
curve
, B) An improvement in technology that increases the maximum output of both goods
C) A decrease in consumer demand for one of the two goods
D) A shift of resources from producing Good X to producing Good Y along the same curve
E) An increase in the price of Good X
6. A bowed-out (concave) Production Possibilities Curve reflects which economic principle?
A) The law of demand
B) The law of increasing opportunity cost
C) The law of diminishing marginal utility
D) Comparative advantage
E) The law of supply
Country A can produce a maximum of 40 units of Cloth or 20 units of Wheat using all its resources. Country B can produce
a maximum of 30 units of Cloth or 30 units of Wheat using all its resources.
7. Based on the data above, which country has the absolute advantage in producing Cloth?
A) Country A, because it can produce more total Cloth (40 > 30)
B) Country B, because it can produce more total Wheat
C) Neither country has an absolute advantage in Cloth
D) Both countries have an equal absolute advantage in Cloth
E) It cannot be determined without price data
8. Using the same production data from the previous question (Country A: 40 Cloth or 20 Wheat; Country B: 30 Cloth
or 30 Wheat), Country A's opportunity cost of producing 1 unit of Wheat is:
A) 0.5 units of Cloth
B) 1 unit of Cloth
C) 2 units of Cloth
D) 4 units of Cloth
E) 20 units of Cloth
9. Continuing the same example, which country has the comparative advantage in Wheat, and why?
A) Country A, because its opportunity cost of Wheat (2 Cloth) is higher than Country B's (1 Cloth)
B) Country B, because its opportunity cost of Wheat (1 Cloth) is lower than Country A's (2 Cloth)
C) Country A, because it has the absolute advantage in Cloth
D) Neither country should specialize in Wheat
E) Both countries have identical comparative advantages
10. Two countries agree to trade Wheat for Cloth at a rate of 1 Wheat for 1.5 Cloth. Based on the opportunity costs
calculated above (Country A: 2 Cloth per Wheat; Country B: 1 Cloth per Wheat), this trade rate is:
A) Beneficial to both countries, since it falls between their two opportunity costs
B) Beneficial only to Country A
C) Beneficial only to Country B
D) Harmful to both countries
E) Impossible to evaluate without absolute advantage data
11. According to the law of demand, all else equal, when the price of a good rises:
A) Quantity demanded rises
B) Quantity demanded falls
C) Demand increases
UNIT 1 PRACTICE TEST
Basic Economic Concepts
25 questions — modeled on official AP question styles and stimulus formats.
Give yourself 30 minutes. Answers and explanations begin on a separate page after the questions.
Multiple Choice Questions
1. Economics is best defined as the study of:
A) How governments should regulate private businesses
B) How individuals and societies allocate scarce resources among unlimited wants and needs
C) How to maximize a single firm's profit regardless of resource limits
D) How stock markets determine share prices
E) How international treaties are negotiated
2. Which of the following is NOT one of the four factors of production?
A) Land
B) Labor
C) Capital
D) Entrepreneurship
E) Currency
3. A student decides to spend Saturday studying for an exam instead of working a shift at their part-time job, which
would have paid $80. The opportunity cost of studying is:
A) The time spent studying
B) $80, the value of the next-best alternative given up
C) The cost of the textbook used to study
D) Zero, since studying does not involve a monetary transaction
E) The average of all possible alternatives, not just the best one
4. On a Production Possibilities Curve (PPC), a point located inside the curve represents:
A) An efficient use of all available resources
B) An unattainable combination of output given current resources and technology
C) An inefficient use of resources, such as unemployment or underutilized capacity
D) The result of economic growth
E) A combination that violates the law of supply
5. Which of the following would cause an entire Production Possibilities Curve to shift outward?
A) A decrease in the unemployment rate, moving the economy from a point inside the curve to a point on the
curve
, B) An improvement in technology that increases the maximum output of both goods
C) A decrease in consumer demand for one of the two goods
D) A shift of resources from producing Good X to producing Good Y along the same curve
E) An increase in the price of Good X
6. A bowed-out (concave) Production Possibilities Curve reflects which economic principle?
A) The law of demand
B) The law of increasing opportunity cost
C) The law of diminishing marginal utility
D) Comparative advantage
E) The law of supply
Country A can produce a maximum of 40 units of Cloth or 20 units of Wheat using all its resources. Country B can produce
a maximum of 30 units of Cloth or 30 units of Wheat using all its resources.
7. Based on the data above, which country has the absolute advantage in producing Cloth?
A) Country A, because it can produce more total Cloth (40 > 30)
B) Country B, because it can produce more total Wheat
C) Neither country has an absolute advantage in Cloth
D) Both countries have an equal absolute advantage in Cloth
E) It cannot be determined without price data
8. Using the same production data from the previous question (Country A: 40 Cloth or 20 Wheat; Country B: 30 Cloth
or 30 Wheat), Country A's opportunity cost of producing 1 unit of Wheat is:
A) 0.5 units of Cloth
B) 1 unit of Cloth
C) 2 units of Cloth
D) 4 units of Cloth
E) 20 units of Cloth
9. Continuing the same example, which country has the comparative advantage in Wheat, and why?
A) Country A, because its opportunity cost of Wheat (2 Cloth) is higher than Country B's (1 Cloth)
B) Country B, because its opportunity cost of Wheat (1 Cloth) is lower than Country A's (2 Cloth)
C) Country A, because it has the absolute advantage in Cloth
D) Neither country should specialize in Wheat
E) Both countries have identical comparative advantages
10. Two countries agree to trade Wheat for Cloth at a rate of 1 Wheat for 1.5 Cloth. Based on the opportunity costs
calculated above (Country A: 2 Cloth per Wheat; Country B: 1 Cloth per Wheat), this trade rate is:
A) Beneficial to both countries, since it falls between their two opportunity costs
B) Beneficial only to Country A
C) Beneficial only to Country B
D) Harmful to both countries
E) Impossible to evaluate without absolute advantage data
11. According to the law of demand, all else equal, when the price of a good rises:
A) Quantity demanded rises
B) Quantity demanded falls
C) Demand increases
