AP Macroeconomics Midterm Exam Review (Units 1-3)

An economist would probably state that in a market economy, prices are generally determined by the interaction between 

• buyers and sellers
• wholesalers and retailers
• producers and labor unions
• consumers and government officials

Which of the following is likely to increase the demand for peanut butter?

• Fewer children in the population
• News that insects have destroyed much of the peanut crop and that there will be less peanut butter on the shelves in three months.
• A big increase in the price of jelly.
• A report from the Surgeon General of the United States that eating peanut butter makes people nutty.

In economics, a shortage of a product occurs when

• the product's price falls below its market-clearing level
• the product's market-clearing level reduces overall demand
• the people who buy the product consume more than they need
• the businesses producing the product become less efficient

The US can produce 200 airplanes or 400 trucks. Japan can produce 300 trucks or 100 airplanes. 
Which country has the comparative advantage in producing trucks and what is their opportunity cost? 

• Japan, 1/3 airplane per truck
• US, 1/2 airplane per truck
• US, 2 airplanes per truck
• Japan, 3 airplanes per truck

The US can produce 200 airplanes or 400 trucks. Japan can produce 300 trucks or 100 airplanes. 
Which country has the comparative advantage in producing airplanes and what is their opportunity cost? 

• Japan, 1/3 trucks per airplane
• US, 1/2 trucks per airplane
• US, 2 trucks per airplane
• Japan, 3 trucks per airplane

Suppliers often reduce prices because they

• have a shortage of products

• have a surplus of products to sell

• want decrease consumer demand

• want to increase the product supply

What does the Production Possibilities Frontier represent? 

• A.  A catalog of all possible production options, represented as percentages.
• B. The tradeoffs between possible production levels for two goods.
• C. The amount that a society could produce if it devoted all its resources to producing one good.
• D. The possible gains from international trade in two or more goods.

The resource that includes equipment, machinery, buildings, and tools.

• Land
• Labor
• Capital 
• Entrepreneur

The major types of resources used to make a product are called  

• natural resources
• factors of reduction
• factors of production
• capital resources

In economics, the pleasure, happiness, or satisfaction received from a product is called:

• status fulfillment

• marginal cost

• rational outcome

• utility