AP Macroeconomics chapter practice15 questions

03 Scarcity, Opportunity Cost, and the Production Possibilities Frontier

These questions come directly from the chapter practice in the book. Choose the best answer, check your reasoning, and use the explanation to correct any gap.

Question 1

Question 1 of 15

Which of the following statements best explains why scarcity is present in every economy, no matter how wealthy that economy becomes?

Scarcity is the gap between finite resources and the competing uses people value, and no amount of added wealth closes it. A mistakes the supply of money for the supply of real resources; printing more money creates no new labor or capital. B, D, and E describe how resources get allocated, through taxation, trade, or the distribution of income, but none of them explains why allocation is necessary at all.
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C. Resources are limited relative to people's wants.

Scarcity is the gap between finite resources and the competing uses people value, and no amount of added wealth closes it. A mistakes the supply of money for the supply of real resources; printing more money creates no new labor or capital. B, D, and E describe how resources get allocated, through taxation, trade, or the distribution of income, but none of them explains why allocation is necessary at all.

Question 2

Question 2 of 15

A bakery can produce either 30 cakes or 90 loaves of bread with one day's resources. The opportunity cost of one cake is

One cake uses resources that would otherwise turn out (90)/(30)=3 loaves, so the cost of a cake is stated in loaves. A inverts the ratio into cakes per loaf, and B has the arithmetic right but names the good gained rather than the good given up. D subtracts 90-30, and E reports the bread maximum instead of the exchange rate between the two goods.
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C. 3 loaves

One cake uses resources that would otherwise turn out (90)/(30)=3 loaves, so the cost of a cake is stated in loaves. A inverts the ratio into cakes per loaf, and B has the arithmetic right but names the good gained rather than the good given up. D subtracts 90-30, and E reports the bread maximum instead of the exchange rate between the two goods.

Question 3

Question 3 of 15

A combination of two goods lies strictly inside a production possibilities frontier. Which of the following does that indicate?

An interior combination leaves room to produce more of one good without producing less of the other, which is the signature of idle or misallocated resources. Choice B describes an exterior combination, A and D concern preferences and growth rather than efficiency, and C belongs to a comparison between countries.
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E. Unemployed or inefficiently used resources

An interior combination leaves room to produce more of one good without producing less of the other, which is the signature of idle or misallocated resources. Choice B describes an exterior combination, A and D concern preferences and growth rather than efficiency, and C belongs to a comparison between countries.

Question 4

Question 4 of 15

A production possibilities frontier drawn bowed outward from the origin indicates

Curvature comes from resources that are not equally suited to both goods, so each extra unit of one good costs more of the other than the unit before it. B describes the straight-line frontier that constant costs would produce, and D names the resource condition behind that straight line. C confuses moving along the frontier with losing output, since one good rises as the other falls, and E describes a point rather than the shape of the curve.
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A. increasing opportunity cost as one good expands

Curvature comes from resources that are not equally suited to both goods, so each extra unit of one good costs more of the other than the unit before it. B describes the straight-line frontier that constant costs would produce, and D names the resource condition behind that straight line. C confuses moving along the frontier with losing output, since one good rises as the other falls, and E describes a point rather than the shape of the curve.

Question 5

Question 5 of 15

An economy's production possibilities frontier shifts outward, rather than production moving along it, when

Better technology lets the same resources turn out more of at least one good, and that relocates the frontier itself. A reallocates existing resources, which is movement along the curve. C pushes production inside the frontier by idling resources, and D and E change spending or the price level, neither of which alters what the economy is capable of producing.
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B. technology improves and raises productivity

Better technology lets the same resources turn out more of at least one good, and that relocates the frontier itself. A reallocates existing resources, which is movement along the curve. C pushes production inside the frontier by idling resources, and D and E change spending or the price level, neither of which alters what the economy is capable of producing.

Question 6

Question 6 of 15

Country A can produce 100 tons of wheat or 50 machines with its resources; Country B can produce 60 tons of wheat or 60 machines. Which country should specialize in machines, and why?

Compare costs, not output totals. A machine costs Country A (100)/(50)=2 tons of wheat and costs Country B (60)/(60)=1 ton, so B gives up less and should build the machines. A quotes A's cost correctly but treats the higher cost as the qualification. B and C read output levels as costs, and D denies a gap the arithmetic plainly shows.
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E. Country B, since one machine costs it 1 ton

Compare costs, not output totals. A machine costs Country A (100)/(50)=2 tons of wheat and costs Country B (60)/(60)=1 ton, so B gives up less and should build the machines. A quotes A's cost correctly but treats the higher cost as the qualification. B and C read output levels as costs, and D denies a gap the arithmetic plainly shows.

Question 7

Question 7 of 15

Productive efficiency and allocative efficiency are separate conditions. Which of the following combinations satisfies the first without satisfying the second?

Any point on the frontier uses every resource fully, so productive efficiency holds there; whether the resulting mix is the one people want is a separate question, and that is what allocative efficiency asks. C leaves resources idle and so fails the first condition outright. A names a combination the economy cannot reach, B names one that wastes nearly everything, and E collapses two conditions the chapter keeps apart.
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D. A frontier combination that does not match society's preferences

Any point on the frontier uses every resource fully, so productive efficiency holds there; whether the resulting mix is the one people want is a separate question, and that is what allocative efficiency asks. C leaves resources idle and so fails the first condition outright. A names a combination the economy cannot reach, B names one that wastes nearly everything, and E collapses two conditions the chapter keeps apart.

Question 8

Question 8 of 15

Technology improves only in the production of consumer goods. A frontier drawn with consumer goods on the horizontal axis will

Only the consumer-goods maximum rises, so the curve pivots outward on the horizontal intercept while the vertical intercept holds still. C pivots on the wrong axis, treating the gain as though it landed on capital goods. E assumes both maximums rose, A reverses the direction of a productivity gain, and D denies that anything happened.
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B. rotate outward along the horizontal axis

Only the consumer-goods maximum rises, so the curve pivots outward on the horizontal intercept while the vertical intercept holds still. C pivots on the wrong axis, treating the gain as though it landed on capital goods. E assumes both maximums rose, A reverses the direction of a productivity gain, and D denies that anything happened.

Question 9

Question 9 of 15

An economy moves from one point on its production possibilities frontier to a different point on the same frontier. What must have occurred?

Both points lie on the same frontier, so capacity is unchanged and only the composition of output has moved. Choices A and C would relocate the frontier, B would move production inside it, and E misstates what specialization can accomplish.
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D. A change in the economy's current output mix

Both points lie on the same frontier, so capacity is unchanged and only the composition of output has moved. Choices A and C would relocate the frontier, B would move production inside it, and E misstates what specialization can accomplish.

Question 10

Question 10 of 15

Under marginal analysis, which of the following conditions justifies undertaking one more unit of an activity?

Marginal analysis weighs the benefit of the next unit against the cost of that same unit, and nothing else enters. B and C substitute averages and totals, both of which can look favorable while the next unit is not worth taking. D lets past results decide a forward-looking choice, and E counts only explicit money costs, leaving the forgone alternative out of the comparison.
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A. Its additional benefit at least covers its additional cost.

Marginal analysis weighs the benefit of the next unit against the cost of that same unit, and nothing else enters. B and C substitute averages and totals, both of which can look favorable while the next unit is not worth taking. D lets past results decide a forward-looking choice, and E counts only explicit money costs, leaving the forgone alternative out of the comparison.

Question 11

Question 11 of 15

In an economy where producing one table requires giving up 5 chairs, the opportunity cost of producing one chair is

If one table costs 5 chairs, then one chair costs (1)/(5) of a table. Choice D repeats the original ratio without inverting it, B has the fraction right but names the good gained rather than the one given up, C subtracts one from the ratio, and E squares it.
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A. one-fifth table

If one table costs 5 chairs, then one chair costs (1)/(5) of a table. Choice D repeats the original ratio without inverting it, B has the fraction right but names the good gained rather than the one given up, C subtracts one from the ratio, and E squares it.

Question 12

Question 12 of 15

What is true of a combination of goods that lies outside an economy's current production possibilities frontier?

Combinations outside the frontier require more resources or better technology than the economy currently has. Choice A describes an interior point, B calls an unattainable point attainable, C makes preferences a source of capacity, and D treats a nominal variable as though it created real resources.
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E. It is unattainable with current resources and technology.

Combinations outside the frontier require more resources or better technology than the economy currently has. Choice A describes an interior point, B calls an unattainable point attainable, C makes preferences a source of capacity, and D treats a nominal variable as though it created real resources.

Question 13

Question 13 of 15

A country devotes a larger share of current output to capital goods and a smaller share to consumer goods. The immediate effect is

Choosing more capital goods today reallocates existing resources, which is a move along the current frontier. Choice A describes the later payoff rather than the immediate effect, C reverses the direction of that later effect, B implies resources go idle, and E confuses a production choice with a spending shift.
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D. a movement along today's frontier

Choosing more capital goods today reallocates existing resources, which is a move along the current frontier. Choice A describes the later payoff rather than the immediate effect, C reverses the direction of that later effect, B implies resources go idle, and E confuses a production choice with a spending shift.

Question 14

Question 14 of 15

Resources are classified by the role they play in production. Which of the following items counts as capital?

Capital is produced equipment used to make other goods, and the van does exactly that on every route. Choice A is a financial claim on a firm rather than something that produces anything. C is a natural resource still in the ground, classified as land, and D is the payment made for labor rather than the labor itself. E is a consumer good, since the household that bought it produces nothing with it.
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B. A delivery van a bakery drives daily

Capital is produced equipment used to make other goods, and the van does exactly that on every route. Choice A is a financial claim on a firm rather than something that produces anything. C is a natural resource still in the ground, classified as land, and D is the payment made for labor rather than the labor itself. E is a consumer good, since the household that bought it produces nothing with it.

Question 15

Question 15 of 15

Which of the following defines opportunity cost most accurately?

Opportunity cost counts the single highest-valued alternative that was available and given up. A adds together alternatives that could not all have been taken anyway. B counts only money paid and misses forgone uses of time and resources, D looks backward at effort already spent, and E reports a quantity of resources rather than the value of what they could have done.
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C. The value of the next-best alternative sacrificed

Opportunity cost counts the single highest-valued alternative that was available and given up. A adds together alternatives that could not all have been taken anyway. B counts only money paid and misses forgone uses of time and resources, D looks backward at effort already spent, and E reports a quantity of resources rather than the value of what they could have done.

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