AP Macro Unit 1

Land, Labor, Capital, and Entrepeneurship are the _________________

• factors of production

• human capital

• physical capital

• consumer goods

• constant opportunity cost

When McDonalds' has their cheeseburgers on sale for $1 (instead of $3), which of the following will this cause?

• Demand will increase

• Supply will decrease

• Quantity Demanded will increase

• Demand will decrease

• Quantity Demanded will decrease

Factor/Resource Market

• Method for determining comparative advantage that measures what goes into production by using the formula IOU (Other goes Under)

• The “place” where resources (land, labor, capital, and entrepreneurship) are sold to businesses

• The “place” where goods and services produced by businesses are sold to households

• Payment for the factors of production, namely rent, wages, interest, and profit

• Method for determining comparative advantage that measures what is produced by using the formula OOO (Other goes Over)

Transfer Payments

• The producer with the lowest opportunity cost

• When the government redistributes income

• Any point on the PPC representing products that are being produced in the least costly way

• The producer that can produce the most output OR requires the least amount of inputs (resources)

• The most optimal point on the PPC representing products that are being produced are the ones most desired by society

Command Economy

• An economic system with free markets but also some government intervention

• An economic system where individuals answer the 3 economic questions and own all resources

• Resources are NOT easily adaptable to producing both goods resulting in a bowed out curve on the PPC

• An economic system where the government answers the 3 economic questions and owns all resources

• Resources are easily adaptable for producing either good creating a straight line on the PPC

Mixed Economy

• An economic system with free markets but also some government intervention

• An economic system where individuals answer the 3 economic questions and own all resources

• Resources are NOT easily adaptable to producing both goods resulting in a bowed out curve on the PPC

• An economic system where the government answers the 3 economic questions and owns all resources

• Resources are easily adaptable for producing either good creating a straight line on the PPC

Which of the following is the best example of physical capital?

• A $100,000 business loan from a bank

• A business hiring 10,000 workers at a factory

• A truck for a delivery company

• An oven for a family of four

• An increase in construction jobs

What is the primary focus of AP Macro Unit 1?

• Supply and Demand

• Economic Systems

• Market Structures

• Monetary Policy

Which of the following best describes a market economy?

• An economy where the government makes all decisions

• An economy where supply and demand determine prices

• An economy with no private property

• An economy with fixed prices

In a command economy, who decides what goods and services are produced?

• Consumers

• Businesses

• Government

• Market forces