UNIT

1 Microeconomics
MULTIPLE-CHOICE
SAMPLE QUESTIONS

Sample Multiple-Choice Questions

Circle the letter of each correct answer. 4. Which of the following is true of the
concept of increasing opportunity cost?
1. The crucial problem of economics is (A) It is unimportant in command economies
(A) establishing a fair tax system. because of central planning.
(B) providing social goods and services. (B) It suggests that the use of resources to pro-
(C) developing a price mechanism that duce a set of goods and services means
reflects the relative scarcities of products that as more of one is produced, some of
and resources. the other must be sacrificed.

(D) allocating scarce productive resources (C) It is irrelevant if the production possibili-
to satisfy wants. ties curve is convex to the origin.

(E) enacting a set of laws that protects (D) It suggests that unlimited wants can be
resources from overuse. ful- filled.
(E) It means that resources are plentiful and
2. When one decision is made, the next best alter- opportunities to produce greater amounts of
native not selected is called goods and services are unlimited.
(A) economic resource.
(B) opportunity cost. 5. To be considered scarce, an economic
resource must be which of the following?
(C) scarcity.
I. Limited
(D) comparative disadvantage. II. Free
(E) production. III. Desirable
(A) I only
3. Which of the following is true if the produc- (B) I and II only
tion possibilities curve is a curved line (C) II and III
concave to the origin?
only (D) I and III
(A) Resources are perfectly substitutable only (E) I, II
between the production of the two goods. and III
(B) It is possible to produce more of both
products.
6. The basic economic problem is reflected
(C) Both products are equally capable of in which of the following concepts?
satis- I. Opportunity cost
(D) The prices of the two products are the same. II. Production possibilities
(E) As more of one good is produced, more and III. The fallacy of
more of the other good must be given up. composition IV. Ceteris
paribus
(A) I only
(B) IV only
(C) I and II only
(D) II and III
only Education, New York, N.Y.
Advanced Placement Economics Microeconomics: Student Activities © National Council on Economic
35
(E) II, III and IV only
UNIT

1 Microeconomics
MULTIPLE-CHOICE
SAMPLE QUESTIONS (continued)

7. Which of the following goods would be 10. In which way does a straight-line
con- sidered scarce? production possibilities curve differ from a
I. Education concave pro- duction possibilities curve?
II. Gold
(A) A straight-line production possibilities
III. Time curve has a decreasing opportunity cost.
(A) I only (B) A straight-line production possibilities
(B) II only curve has a constant opportunity cost.
(C) III only (C) A straight-line production possibilities
(D) I and II only curve has an increasing opportunity
(E) I, II and III cost.
(D) A straight-line production possibilities
8. The value of the best alternative forgone when curve does not show opportunity cost.
a decision is made defines (E) There is no difference between the two
(A) economic good. production possibilities curves.
(B) opportunity cost.
11. The law of increasing opportunity cost
(C) scarcity.
is reflected in the shape of the
(D) trade-off. (A) production possibilities curve concave
(E) comparative advantage. to the origin.
(B) production possibilities curve convex to
9. Which of the following problems do the origin.
all economic systems face?
(C) horizontal production possibilities
I. How to allocate scarce resources among
curve. (D) straight-line production
unlimited wants
possibilities curve.
II. How to distribute income equally among
all the citizens (E) upward-sloping production
III. How to decentralize markets possibilities curve.
IV. How to decide what to produce, how to
produce and for whom to produce
(A) I only
(B) I and IV only
(C) II and III only
(D) I, II and III only
(E) I, II, III and IV

36
Advanced Placement Economics Microeconomics: Student Activities © National Council on Economic Education, New York,
N.Y.
UNIT

1 Microeconomics
MULTIPLE-CHOICE
SAMPLE QUESTIONS (continued)

The figure below is used for questions 12 through 13. Which of the following statements about the
15. It shows the production possibilities curve for production possibilities curve is true?
a country with full employment of a given-size
(A) Point A is not attainable in a developed
labor force. society.
B (B) Point D is not attainable given the
society’s resources.
(C) The relative position of Points C and D
E reflect production alternatives rather than
C relative prices.
(D) Elimination of unemployment will move
the production possibilities curve to the
right, closer to Point E.
D (E) Point E lies outside the production possi-
A bilities curve because it represents a
combi- nation of resources not desired by
the citi- zens of the country.

F
14. How might Point E be attained?
COMPUTERS
(A) If the country’s resources were more fully
employed
12. If the country is currently producing at (B) If the country’s resources were shifted to
Point C,it can produce more computers by encourage more efficient use of scarce
doing resources
which of the (C) If improvements in technology occurred
following? (A) Moving in either the computer sector or the farm-
products sector
to Point A (B)
Moving to Point B (D) If firms decreased their output of
computers
(C) Moving to Point D
(E) If the nation used more of its scarce
(D) Moving to Point E
resources to produce farm products
(E) Remaining at Point C, since computer
pro- duction is maximized 15. The production possibilities curve of the
coun- try would be most likely to shift to the
right if the country were currently
producing at which of the following points?
(A) Point A
(B) Point B
(C) Point
C (D)
Point D
(E) Point E

Advanced Placement Economics Microeconomics: Student Activities © National Council on Economic Education, New York, N.Y.
37
UNIT

1 Microeconomics MULTIPLE-CHOICE
SAMPLE QUESTIONS (continued)

The figure below is used for questions 16, 17 and 18. Which of the following is most likely to
18. It shows the production possibilities curve for cause the production possibilities curve to
two shift out- ward toward Point W?
(A) Employing the country’s resources more
of a given-size labor force. fully (B) Shifting the country’s resources to
encourage
A more efficient use of scarce resources
W
(C) Improving the technology for the
B
production
of either consumer or capital goods
C (D) Decreasing production of capital goods
(E) Shifting some scarce resources to produce
consumer goods in the current period
D
X 19. The opportunity cost of producing
an additional unit of product A is
(A) all of the human and capital resources
used to produce product A.
E
(B) the retail price paid for product
CAPITAL GOODS
A. (C) the wholesale price of
product A.
16. If the country is currently producing at (D) the amount of product B that cannot
Point C, it can produce more capital goods now be produced because of product A.
by mov-
ing in the direction of (E) the profit that was earned from
producing product A.
(A) Point A.
(B) Point B. 20. Which of the following would cause a leftward
(C) Point D. shift of the production possibilities curve?
(D) Point W. (A) An increase in unemployment
(E) Point X. (B) An increase in inflation

(C) An increase in capital equipment

17. If the country moves from Point C to Point (D) A decrease in consumer demand
D, future economic growth will
(E) A decrease in working-age
(A) decrease. population
(B) increase.
(C) not change, but consumer satisfaction will 21. Which of the following would cause an
increase. outward or rightward shift in the
(D) not change, but unemployment will production possibilities curve?
increase. (A) An increase in unemployment
(E) not change, but inflation will increase. (B) An increase in inflation
(C) An increase in capital equipment
(D) A decrease in natural resources
Advanced Placement Economics Microeconomics: Student Activities © National Council on Economic Education, New York,
N.Y.
(E) A decrease in the number of
38 workers
 UNIT

1 Microeconomics MULTIPLE-CHOICE
SAMPLE QUESTIONS (continued)

Use the following table for questions 22, 23 and 24. 25. The table below shows the number of hours
needed to produce one bushel of soybeans and
Food Clothing Food Clothing
one bushel of rice in each of two countries.
0 30 0 40 One bushel One bushel
2 24 4 32 Country of soybeans of rice
4 18 8* 24* U.S. 5 hours 7 hours
5* 12* 12 16 Japan 15 hours 10 hours
8 6 16 8
Which of the following statements must
10 0 20 0
be true?
Two nations, Mars and Venus, each produce I. The United States has an absolute
food and clothing. The table above gives advan- tage in producing soybeans.
points on each nation’s production II. Japan has an absolute advantage in
possibilities curve. The asterisks indicate their
producing rice.
current point of production.
III. Japan has a comparative advantage in pro-
ducing soybeans.
22. In Mars, the opportunity cost of obtaining the
IV. The United States should specialize in the
first two units of food is how many units
of clothing? production of soybeans and Japan
should specialize in the production of
(A) 2 (B) 3 rice.
(C) 6 (D) (A) I only
8 (B) III only
(E) 12 (C) I and IV only
23. In Venus, the opportunity cost of the first unit of
(D) II and IV
(A) food is two units of clothing.
only
(B) food is eight units of
clothing. (C) clothing is two (E) I, II, III and IV
units of food. (D) clothing is
26. A rational decision maker will choose to
four units of food. (E) clothing
act only if
is eight units of food.
(A) the marginal benefit of the action is greater
than the average cost of that action.
24. Which of the following statements is correct
based on the concept of comparative advantage? (B) the marginal benefit of the action is greater
than the marginal cost of that action.
(A) Mars and Venus should continue
producing the quantities indicated by the (C) the marginal benefit of the action is less
asterisks. than the average cost of that action.

(B) Mars should specialize in the production of (D) the average benefit of the action is less
food. than the average cost of that action.

(C) Mars should specialize in the production of (E) the average benefit of the action is greater
clothing. than the average cost of that action, and
the marginal benefit of the action is
(D) Venus has the comparative advantage in
greater than the marginal cost of that
clothing.
action.
(E) Mars has an absolute advantage in the pro-
duction of food. 39
Advanced Placement Economics Microeconomics: Student Activities © National Council on Economic Education, New York, N.Y.
UNIT

1 Microeconomics MULTIPLE-CHOICE
SAMPLE QUESTIONS (continued)

27. According to the theory of comparative advan- 29. “If you want to have anything done correctly,
you have to do it yourself.”This quote
tage, a good should be produced where violates the principle of which of the
(A) its explicit costs are least. following
(B) its opportunity costs are least. economic concepts?
(C) the cost of real resources used is (A) Scarcity
least. (B) Supply
(D) production can occur with the (C) Comparative advantage
greatest increase in employment. (D) Diminishing returns
(E) production can occur with the lowest (E) Demand
increase in employment.

30. After graduating with an accounting degree,

28. Which of the following statements violates the
you decide to become a rock star. Your
economic concept of matching marginal bene-
oppor- tunity costs include which of the
fits with marginal costs in test taking?
following?
(A) “My grade in this course is already an A
and the final examination is optional, so I. Goods forgone to build and furnish
I’m not taking the final examination in a home studio in which to practice
this class.” and record
(B) “My grade going into the final II. Tuition costs
examination for math is B-plus. The final III. Forgone income as an accountant
exam consti- tutes half of the course
grade, so I’m going to study more for the (A) I only
final in this class than in solid-state
genetics, where I have a solid A.” (B) II only
(C) “Most of my grades are B-minus, but in (C) III only
fluid dynamics I have an A. I’m going to (D) I and II only
study only for the final exam in fluid
dynamics.” (E) I and III only
(D) “If I spend two extra hours a week
reading English literature, my scores on
standard- ized tests of verbal skills will
improve by 20 percent. Since my verbal
skills are average, I’m going to reallocate
my time into read- ing more literature.”
(E) All the statements violate the concept of
matching marginal benefits with marginal
costs in test taking.

40
Advanced Placement Economics Microeconomics: Student Activities © National Council on Economic Education, New York,
N.Y.
 UNIT

1 Microeconomics
LONG FREE-RESPONSE
SAMPLE QUESTIONS

Sample Long Free-Response Questions

1. Every society has the fundamental problem of scarcity.
(A) What is scarcity?

(B) What three questions must every society answer because of scarcity?

(C) What are the three ways societies have dealt with the scarcity problem?

(D) Give one example of how each way is used in the United States.

2. Hightechland produces two commodities: movies and computers. Hightechland’s resources

include workers, factories, electricity and so on. The following schedule indicates some of
the points on Hightechland’s production possibilities curve.
Commodity A B C D E
Movies 100 75 50 25 0
Computers 0 30 55 70 80

(A) Does movie production exhibit increasing, decreasing or constant per-unit opportunity costs?

(B) Graph Hightechland’s production possibilities curve, and label it AA.

Advanced Placement Economics Microeconomics: Student Activities © National Council on Economic Education, New York, N.Y.

43
UNIT

1 Microeconomics
LONG FREE-RESPONSE
SAMPLE QUESTIONS (continued)

(C) Suppose Hightechland is operating at Point C but would like to alter production to Point
D. What would be the per-unit opportunity cost of producing more computers?

(D) Suppose Hightechland is operating at Point C but would like to alter production to Point
B. What would be the per-unit opportunity cost of producing more movies?

(E) What will happen to Hightechland’s production possibilities curve if many of its movie sets
are destroyed by fire? (Assume that the sets are not used in the production of computers.)
Using the same graph you drew for Question 2(B), draw Hightechland’s new production
pos- sibilities curve and label it BB.

(F) What will happen to Hightechland’s production possibilities curve if all the country’s
resources are reduced (perhaps by natural disaster or war)? Using the same graph as in
Question 2(B), draw Hightechland’s new production possibilities curve and label it
CC.

(G) What will happen to Hightechland’s production possibilities curve if technology improves
both the production of movies and the production of computers? Using the same graph as
in Question 2(B), draw Hightechland’s new production possibilities curve and label it DD.

44

Advanced Placement Economics Microeconomics: Student Activities © National Council on Economic Education, New York,
N.Y.
 UNIT

1 Microeconomics
LONG FREE-RESPONSE
SAMPLE QUESTIONS (continued)

3. Explain how each of the following may affect the production possibilities curve of the United
States or the point at which the economy is operating. Draw a production possibilities curve;
put “Capital Goods”on the vertical axis and “Consumer Goods”on the horizontal axis.
Now, add a PPC curve or point to the graph to illustrate the scenario.

(A) The Congress and the president

decide to provide more funding for
higher education with more students
attending college and graduating.

(B) New advances in medicine allow for

a healthier lifestyle.

(C) The United States agrees to be a

part of a world-trade agreement
that will foster international trade.

Advanced Placement Economics Microeconomics: Student Activities © National Council on Economic Education, New York, N.Y.
45
UNIT

1 Microeconomics
LONG FREE-RESPONSE
SAMPLE QUESTIONS (continued)

(D) The unemployment rate increases

in the economy from 4.2 percent to
5.1 percent of the labor force.

(E) Computer viruses are out of

control, and efficiency and output
in the economy fall.

46 Advanced Placement Economics Microeconomics: Student Activities © National Council on Economic Education, New York,
N.Y.