AP Economics



Module 1The Study of EconomicsMAIN IDEA(s) Identify clear main ideas or purposes1. ?Why is scarcity important in economics?2. ?What is opportunity cost?3. ?What is the difference between positive and normative economics?4. ?What is studied in microeconomics??5. ?What is studied in macroeconomics?SUPPORTING DETAILS ?Locate and interpret details. Understand the function of a part of a passage. 6. ?Individual Choice: ?The Core of EconomicsA. ???Resources are ScarceB. ?Opportunity Cost: ?The Real Cost of Something is What You Must Give Up to Get It7. ?Microeconomics vs. Macroeconomics8. ?Positive vs. Normative Economics9. ?When and Why Economists DisagreeSEQUENTIAL, COMPARATIVE, & CAUSE-EFFECT RELATIONSHIPSOrder sequences of events. Understand the subtleties in relationships between people, ideas, and concepts. Understand implied, subtle, or complex cause-effect relationships.10. ?What could happen to the price of a scarce resource?11. ?Why do so many people choose to give up earning more money at age 18 and head to college?MEANING OF WORDSDetermine the appropriate meaning of context-dependent words, phrases, or statements.12. ?Individual Choice13. ?Economy14. ?Economics15. ?Market Economy16. ?ResourcesA. ?LandB. ?LaborC. ?CapitalD. ?Entrepreneurship17. ?Scarce18. ?Opportunity Cost19. ?Microeconomics20. ?Macroeconomics____1.How people choose among the alternatives available to them is:a.not part of the study of economics.b.impossible to describe.c.the study of microeconomics.d.not important.e.normative economics.____2.Manny is attending college and majoring in economics. Manny is improving his scarce resource of:a.land.b.labor.c.capital.d.human capital.e.natural resources.____3.Khalil is offered a free ticket to the opera. His opportunity cost of going to the opera is:a.zero—the tickets were free.b.the price listed on the ticket.c.whatever Khalil would have done had he not gone to the opera.d.the price listed on the ticket plus whatever Khalil would have done had he not gone to the opera.e.the price listed on the ticket minus whatever Khalil could have received by selling it to another person in the parking lot.____4.Your elderly grandma tells you: “I haven't been taking my beloved walks because I'm concerned about falling and getting hurt. See, there is always a cost to doing something. But if you don't do anything, then there is no cost.” Your grandma does not understand the concept of:a.scarcity in economics.b.efficiency in economics.c.negative externalities in economics.d.marginal analysis in economics.e.opportunity cost in economics.____5.If you decide to go to Cancun with your friends during spring break, you realize you cannot go to Paris with your sister in the summer. This statement best represents the economic concept of:a.the real cost of something is what you must give up to get it.b.“how much?” is a decision at the margin.c.people usually exploit opportunities to make themselves better off.d.there are gains from trade.ernment policies can change spending.____6.If the price of gasoline falls and stays low for an extended period of time, we expect people to:a.reduce their reliance on gasoline-powered cars.b.buy larger and less fuel-efficient cars.c.use more public transportation.d.ride bicycles more frequently.e.carpool more often.____7.Which of the following principles underlie the economics of individual choices?a.There are gains from trade.b.Markets move toward equilibrium.c.People usually exploit opportunities to make themselves better off.d.Resources should be used as efficiently as possible to achieve society's goals.e.One person’s spending is another person’s income.____8.Which of these is one of the four principles of individual choice?a.Resources are usually renewable.b.The real cost of something is impossible to measure.c.People take advantage of opportunities to make themselves better off only if there is no risk involved.d.Resources are scarce.e.The government redistributes income through progressive taxation.____9.Which of the following is an example of individual choice?a.The government announces plans to ban smoking in all Florida restaurants.b.Lauren spends her allowance on pillows for her bed.c.France decides to withhold funding to rebuild Iraq.d.Africa decides to accept U.S. aid for humanitarian efforts.e.The stock market collapse has reduced the wealth of many Americans.____10.Alison is offered two jobs: one pays a salary of $45,000 per year and offers 3 weeks of vacation while the other offer provides 2 weeks of vacation and a salary of $54,000. What is the opportunity cost for Alison if she chooses the job offer of $54,000?a.$45,000 plus the 3 weeks of vacationb.$45,000 per yearc.One week of vacationd.Two weeks of vacatione.$9000 and one week of vacation.____11.An example of a positive statement is:a.the rate of unemployment is 4%.b.a high rate of economic growth is good for the country.c.everyone in the country needs to be covered by national health insurance.d.baseball players should not be paid higher salaries than the president of the United States.e.tobacco should be classified as an illegal narcotic.____12.A statement that says that the minimum wage needs to be increased is a:a.positive statement.b.normative statement.c.“other things equal” assumption.d.scientific conclusion based on marginal analysis.e.statement of fact.____13.Of the following statements, which reflect(s) a normative view?I. The U.S. needs to increase the minimum wage to $10 per hour.II. An effective minimum wage results in unemployment.III. An effective minimum wage is a form of a price floor.a.I onlyb.I and II onlyc.II onlyd.II and III onlye.I and III only____14.Which of the following is most likely a macroeconomic question rather than a microeconomic question?a.“Are prescription drug prices rising faster than the overall rate of inflation?”b.“Are consumers buying more bottled water and less fruit juice?”c.“Are salaries for nurses rising or falling?”d.“Should a tax be levied on each ton of carbon a factory emits?”e.“Is the national unemployment rate rising or falling?”____15.One of the issues of importance to macroeconomists is:a.the behavior of individuals and their allocation of income.b.how firms determine the profit maximizing level of output.c.understanding how living standards change over time.d.the behavior of individual markets.e.the regulation of monopolies.____16.According to the optimal output rule, if marginal benefit:a.exceeds marginal cost, an activity should be reduced.b.is less than marginal cost, an activity should be reduced.c.is equal to marginal cost, an activity should be reduced.d.exceeds marginal cost, net benefit is maximized.e.is equal to marginal cost, an activity should be increased.____17.Tara notices that one hour of studying causes her economics grade to improve by 11 points, while the second hour increases her average by 7 points, the third hour yields a 4-point gain and the fourth hour only 1 point. This means that the marginal ________ of studying decreases over time.a.costb.benefitc.opportunity costd.timee.revenue____18.The amount by which an additional unit of an activity increases total cost is: benefit.b.marginal benefit.c.negative benefit.d.marginal cost.e.average total cost.____19.The amount by which an additional unit of an activity increases total benefit is: benefit.b.marginal benefit.c.marginal cost.d.utility.e.the price.____20.The principle of marginal analysis refers to:a.a method of analysis that divides large problems into smaller, more manageable ones.b.the notion that problems facing a group of individuals can be effectively analyzed by focusing on only a small subsample of the group.c.the result that the optimal quantity of an activity is that at which marginal benefit is equal to marginal cost. ................
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