ap micro

Which of the following is true in a command economy?

• There is more private ownership of the factors of production than in a market economy.

• Production decisions are based on the incentive of firms to maximize profits.

• The government directs the use of factors of production.

• The price system is used to allocate resources.

• There is more freedom of enterprise than in a market economy.

Dr. Art and Dr. Zed jointly own an outpatient surgery practice. Dr. Art takes 2 hours to perform knee surgery and 1 hour to perform elbow surgery. Dr. Zed takes 4 hours to perform knee surgery and 1 hour to perform elbow surgery. Which of the following conclusions is supported by the information provided?

Responses

• Dr. Art has a comparative advantage in elbow surgery.

• Dr. Zed has a comparative advantage in elbow surgery.

• Dr. Zed does not have a comparative advantage in performing either procedure.

• Dr. Art does not have a comparative advantage in performing either procedure.

• Dr. Zed has an absolute advantage in performing both procedures.

Dana and Robin produce smoothies and pizza. In one hour Dana can make 20 smoothies or 10 pizzas. In one hour Robin can make 18 smoothies or 6 pizzas. Which of the following statements is true?

Responses

• Robin has an absolute advantage in making smoothies and a comparative advantage in making pizzas.

• Robin has both an absolute advantage and a comparative advantage in making pizzas.

• Dana has a comparative advantage in making both smoothies and pizzas.

• Dana has a comparative advantage in making pizzas, and Robin has a comparative advantage in making smoothies.

• Dana has a comparative advantage in making smoothies, and Robin has a comparative advantage in making pizzas.

The opportunity cost of owning a business is equal to which of the following?

1. The economic profits earned in the business

2. The accounting profits earned in the business

3. The profits that could be earned in another business using the same amount of resources

Responses

• I only

• II only

• III only

• I and III only

• I, II, and III

In a command economy, the quantity of computers produced would be determined by

• factory owners

• the government

• consumers and producers

• international trade

• the wealthy

An opportunity cost is entailed in which of the following situations?

1. A student decides to attend college full-time.

2. A family uses its $20,000 savings to purchase an automobile.

3. A farmer decides to grow more wheat and less corn.

Responses

• I only

• II only

• III only

• I and III only

• I, II, and III

Assume that an economy produces televisions and shoes. Which of the following would cause the production possibilities curve for this economy to shift outward?

Responses

• An increase in the labor force

• An increase in the prices of both goods

• An increase in the prices of resources used to produce both goods

• A decrease in the demand for shoes

• A change in consumers’ tastes in favor of televisions

Mr. Carpenter devotes his working time to producing tables and chairs. An increase in the demand for chairs will result in

Responses

• an increase in the amount of time he devotes to producing tables

• an increase in his opportunity cost of producing tables

• a decrease in the price of lumber

• a decrease in the price of chairs

• a decrease in his total revenue

A production possibilities curve can shift inward if there is

Responses

• an increase in productivity

• an increase in unemployment

• an increase in the price of raw materials

• a misallocation of resources

• a natural disaster

Opportunity cost is defined as

Responses

• excess demand for a good

• unlimited resources and unlimited wants

• a comparative advantage in the production of a good

• the value of the next best alternative that is forgone when an activity is pursued

• the value of all other possible alternatives that are forgone when an activity is pursued