Part 1:

Directions: Complete the following practice FRQs. You must fully explain when asked to & fully label all graphs.

FRQ 1: Two countries, Marland and Teckana, can produce either clothing or food using all their available resources at constant opportunity cost. The table below shows the daily production of clothing or food in Marland and Teckana.

	Clothing	Food
Marland	120	20
Teckana	80	20

(a) Which country has the absolute advantage in producing food? Explain.

(b) Which country has the comparative advantage in producing food? Explain using numbers.

(c) Assume the two countries specialize based on their comparative advantage. If the two countries engage in trade and one unit of food is exchanged for 5 units of clothing, will these terms of trade be mutually beneficial? Explain.

(d) Suppose Teckana invented new equipment to only increase the production of clothing.

(i) Draw a correctly labeled graph of Teckana's initial production possibilities curve, with clothing on the horizontal axis and food on the vertical axis. Plot the numerical values above on the graph.

(ii) Show the effect of the new equipment on Teckana's production possibilities curve.

FRQ 2: The table below shows the marginal utilities in utils that Sarah derives from consuming two goods, snacks, and movies.

Quantity of Snacks	Marginal Utility of Snacks	Quantity of Movies	Marginal Utility of Movies
0	-	0	-
1	20	1	50
2	18	2	35
3	15	3	24
4	12	4	20
5	10	5	15
6	8	6	10

Sarah has a limited weekly income of $50, and she spends it all on snacks and movies. Assume the price of snacks is $5 per unit, the price of a movie ticket is $10, and Sarah is a utility-maximizing consumer.

(a) Would Sarah be able to consume 3 snacks and 5 movies? Explain using numbers.

(b) How many snacks and movies will Sarah consume to maximize her utility? Explain using marginal analysis.

(c) Calculate the total utility Sarah will receive from consuming the utility-maximizing combination of snacks and movies indicated in your answer in part (b). Show your work.

(d) Suppose Sarah's income increases to $60.

(i) What will happen to the marginal utility per dollar spent on movies?

(ii) Will Sarah be better off buying two more snacks or one more movie ticket? Explain using numbers.

Part 2: Just answered the questions and write why you pick them

AP Exam Practice Questions Multiple-Choice Questions ve souloads 4. Which of the following situations is explained by 14.8 HOS 1, In a market economy, most choices about production increasing opportunity costs? and consumption are made by which of the following? a. More people go to college when the job market is a. politicians good. b. many individuals and firms ilove d b. More people do their own home repairs when hourly c. the government Increase HoviT .a wages fall. d. managers c. There are more parks in crowded cities than in e. economists levelbod in an economy. suburban areas. 25 d. Convenience stores cater to busy people. 2. Which of the following pairs indicates a category of / e. People with higher wages are more likely to mow resources and an example of that resource?dawong their own lawns. Category Example Monssitsiosge s 5. Which of the following is a microeconomic issue? a. money investment a. the unemployment rate in your country b. capital LIVILY money b. the gross domestic product for France 002 5 c. capital o noidw an minerals be visgino) .at c. the wage rate for employees at your school AA . Of d. land factory vilids a vanuoo's . d. the national rate of inflation maggo sch: e. land timber Solv 192 10 boog e. government efforts to end a recession 3. You can either go to a movie or study for an exam. 6. Amal likes to eat peaches. She would maximize her Which of the following is an opportunity cost of utility by eating peaches until, for one more peach, studying for the exam? a. the total cost would exceed the total benefit. a. a higher grade on the exam buboiq sthyriw . b. the total benefit would exceed the total cost. b. the price of a movie tickets ge on al sorb 31 .81 c. the total benefit would equal the total cost.bid c. the cost of paper, pens, books, and other study d. the marginal benefit would exceed the marginal cost. materials e. the marginal cost would exceed the marginal benefit. schu ymonoos ne d. the enjoyment from seeing the movie bawod is 6bock s 000, 1 e. the sense of achievement from learning gine d no change don 00a .d 1002 anigole-baswnwob bas ni bewod . OO Imoshod .b 10 10 .5Refer to the following information for Questions 12-13. 7. An economic system that combined elements of traditi onal, market-based, and command economies is called a In the ancient country of Roma, only two goods - spaghetti and meatballs - are produced. There are two tribes in a. rarity. Roma, the Tivoli and the Frivoli. By themselves, in a given b. trad-mar-com economy. month, the Tivoli can produce 30 pounds of spaghetti and c. varied economy. no meatballs, 50 pounds of meatballs and no spaghetti, of d. mixed economy. any combination in between. In the same month, the Frivol; e. combo economy. can produce 40 pounds of spaghetti and no meatballs, 30 Refer to the following table and information for Questions 8-11. pounds of meatballs and no spaghetti, or any combination Suppose that Atlantis is a small, isolated island in the South in between. Atlantic. The inhabitants grow potatoes and catch fish. 12. Which tribe has a comparative advantage in meatball The following table shows the maximum annual output and spaghetti production? combinations of potatoes and fish that can be produced. Meatballs Spaghetti Quantity of fish Tivoli Maximum annual Quantity of a. Tivoli output options potatoes (pounds) (pounds) b. Frivoli Frivoli A 1,000 0 c. Tivoli Frivoli B 800 300 SER d. Frivoli Tivoli C 600 500 e. Neither both D 400 600 13. In AD 100, the Frivoli discovered a new technique for E 200 650 making meatballs and doubled the quantity of meatballs F 0 675 they could produce each month. After the discovery of 8. Atlantis can produce which of the following this new technique in Frivoli only, which tribe had an combinations of output? absolute advantage in meatball production, and which Pounds of potatoes Pounds of fish had a comparative advantage in meatball production? a. 1,000 675 Absolute advantage Comparative advantage b. 600 600 a. Tivoli Tivoli c. 400 600 b. Frivoli Frivoli d. 300 800 c. Tivoli Frivoli e. 200 675 d. Frivoli Tivoli 9. If Atlantis is efficient in production, what is the e. Frivoli both opportunity cost of increasing the annual output of potatoes from 600 to 800 pounds? 14. Which of the following is a basic source of economic a. 200 pounds of fish d. 675 pounds of fish growth in the production possibilities model? b. 300 pounds of fish e. 800 pounds of fish a. specialization d. trade-offs c. 500 pounds of fish b. efficiency nameson e. improved technology 10. As Atlantis produces more potatoes, what is true about c. opportunity cost the opportunity cost of producing potatoes? 15. Comparative advantage explains which of the following a. It stays the same. a. a country's ability to produce more of a particular b. It continually increases. good or service c. It continually decreases. b. when production is considered efficient d. It increases and then decreases. c. why the production possibilities curve is bowed outward e. It decreases and then increases. d. the source of gains from trade 11. Which of the following combinations of output is e. why the production possibilities curve shifts outward efficient? Pounds of potatoes 16. If there is no specialization of resources in the production Pounds of fish a. 1,000 of milk and cream, the production possibilities curve for 0 b. 600 an economy that produces these two goods is 600 c. 400 a. bowed out and downward-sloping. 500 d. 300 400 b. straight and downward-sloping. e. 0 c. bowed in and downward-sloping. d. horizontal. e. vertical. 462 Micro . Unit 1 Basic Economic ConceptsUNIT ONE REVIEW 17. Suppose that in a day Nigel can make three placemats or one gallon of maple syrup, and Pauline can make two placemats or two gallons of maple syrup. Which of the 22. The three basic questions that must be answered in following terms of trade would be mutually beneficial every economy are: for Nigel and Pauline? a. What will be produced? How will it be produced? Who will receive it? a. Nigel trades one placemat for 1/2 gallon of maple b. When will production occur? Where will it occur? syrup from Pauline. Who will the producers be? b. Pauline trades one placemat for 1/2 gallon of maple c. Who will receive money? How will they receive it? syrup from Nigel. When will they receive it? c. Nigel trades one placemat for two gallons of maple d. What resources will go toward food? What resources syrup from Pauline. will go toward capital? What resources will go d. Pauline trades one placemat for two gallons of toward clothing? maple syrup from Nigel. e. What will be taxed? How much will it be taxed? Who e. Nigel trades one placemat for 1/4 gallon of maple will pay the tax? syrup from Pauline. 23. incentivize productivity because they 18, If Country A has an absolute advantage in making allow individuals to benefit from the production and butter and is considering trade with Country B, we trade of goods and services. a. Marginal costs know that c. Opportunity costs b. Production a. Country A also has a comparative advantage in d. Models possibilities frontiers e. Property rights making butter. b. Country B has a comparative advantage in making 24. The country of Sneedleham makes needles and ham at butter . a constant opportunity cost. If Sneedleham acquires c. Country A can make more butter than Country B more resources but the opportunity cost of producing can with a given amount of input. each good remains the same, how will the country's d. if the two countries trade, Country A should production possibilities curve change? a. It will shift inward and become steeper. specialize in making butter. b. It will shift outward and become steeper. e. if the two countries trade, Country B should c. It will change from being linear to being bowed specialize in making butter. outward. 19. Economic growth is defined as an increase in d. It will shift inward with no change in slope. a. the output of an economy. e. It will shift outward with no change in slope. b. the employment level in an economy. 25. Which of the following is true about the ceteris paribus c. the spending level in an economy. assumption? d. the quality of life in an economy. a. It makes the use of more complicated but more . the maximum possible output of an economy. rewarding models. 20. The study of the costs and benefits of doing a little bit b. It means "maximize profit at all costs." more of an activity instead of a little bit less is called c. It simplifies the study of how a single change affects an economy . a, economics. d. It means "the customer is always right." b. microeconomics. e. It means "people behave rationally." E macroeconomics. d. marginal analysis. 26. Kateryna spends all of her income on milk and bananas e. market analysis. and receives 12 utils from the last unit of milk and 8 21. The fundamental problem with command economies is utils from the last unit of bananas. If the price of milk is $3 and the price of bananas is $2, to maximize her total a lack of utility, Kateryna should a. central authority. a. buy more milk. b. workers. b. buy more bananas. . incentives. c. buy fewer bananas. d. land. d. buy more of both goods. e. opportunity cost. e. make no change in her consumption. elgalloBaimarcoMicro . Unit 1 Review 463