AP Micro Microeconomics: Basic Economic Concepts 3

Question 1

A straight-line (linear) production possibilities curve between two goods suggests that:

Accepted Answer

Resources are perfectly adaptable between the two goods

Answer

A linear PPC implies constant opportunity costs, which occurs when resources are equally productive in producing both goods.

Question 2

Economic growth is best represented on a production possibilities curve by:

Accepted Answer

An outward shift of the entire curve

Answer

Economic growth means an economy can produce more of both goods, which is shown by an outward shift of the entire PPC.

Question 3

The three basic economic questions that all societies must answer are:

Accepted Answer

What to produce, how to produce it, and for whom to produce it?

Answer

Every economic system must answer what goods to produce, how to produce them, and who receives the output.

Question 4

In a command economy, the basic economic questions are answered primarily by:

Accepted Answer

Central government planning and directives

Answer

In a command economy, the government centrally plans and directs what, how, and for whom goods are produced.

Question 5

Which of the following would cause the production possibilities curve to shift inward (toward the origin)?

Accepted Answer

A destructive earthquake that destroys capital and infrastructure

Answer

An earthquake that destroys capital reduces the economy's productive capacity, shifting the PPC inward.

AP Practice Test