TOP GUN AP ECONOMICS

UNIT 1 INTELLIGENCE

(CHAPTERS 1, 37 [753-764], & 2)


Chapter 1 – Economic Problem

  • Scarcity v. Unlimited wants
  • Macroeconomics v. Microeconomics
  • Positive Economics v. Normative Economics
  • Opportunity costs
  • Budget Lines
  • Resources
  • Land, labor, capital, entrepreneurship
  • Production Possibilities Model
  • Increasing, constant costs
  • Shifting PPC: change in resources, tech
  • PPC Growth
  • Marginal Cost – Marginal Benefit analysis

Chapter 2–Economic Systems

  • Capitalism v. Communism
  • Marx, Smith
  • Characteristics of Market System
  • Private Property
  • Self-interest
  • Competition
  • Limited Government
  • Money - development
  • Specialization
  • The Invisible Hand
  • Five Fundamental Questions (The Big 3 + 2 More)
  • What will be produced?
  • How will it be produced?
  • Who will get it?
  • How will the system accommodate change?
  • How will the system promote progress?
  • Circular Flow Diagram

Chapter 37– Comparative advantage (Page 754-764)

  • Trading Possibility Line Model
  • Absolute, comparative advantage
  • Trading prices
  • Trading Possibility Line
  • Gains from trade

SAMPLE PROBLEMS

Use the following table to answer questions 4 & 5:

  1. Refer to the above table. For these data the law of increasing opportunity costs is reflected in the fact that:

a.the amount of consumer goods that must be sacrificed to get more capital goods diminishes beyond a point.

b.larger and larger amounts of capital goods must be sacrificed to get additional units of consumer goods.

c.the economy's resources are presumed to be scarce.

d.the production possibilities data would graph as a straight downsloping line.

  1. Refer to the above table. Assume that the economy decides to produce at alternative “B” as opposed to its earlier production at alternative “E”. All other things equal we would expect:

a.its rate of growth will decline.

b.its rate of growth will increase.

c.its production possibilities curve will shift to the left.

d.its production will not longer be productivity efficient .

Use the following to answer questions 10-11:

  1. Refer to the above diagram. If society is currently producing the combination of bicycles and computers shown by point D, the production of 2 more units of bicycles:

a.cannot be achieved because resources are fully employed.

b.will cost 1 unit of computers.

c.will cost 2 units of computers.

d.will cause some resources to become unemployed.

  1. Refer to the above diagram. The combination of computers and bicycles shown by point G:

a.suggests that opportunity costs are constant.

b.is irrelevant because it is inconsistent with consumer preferences.

c.is unattainable, given currently available resources and technology.

d.is attainable, but entails economic inefficiency.

Use the following to answer question 20:

  1. The production possibilities curves above suggest that:

a.West Mudville should specialize in, and export, baseball bats.

b.East Mudville should specialize in, and export, baseball bats.

c.West Mudville should specialize in, and export, both baseballs and baseball bats.

d.workers will try to immigrate from West Mudville to East Mudville.

Can you create a matrix for the above comparative advantage problem?????

Bats / Baseballs / OC Bats / OC Baseballs / Specialize in...
WM
EM

Use the following to answer question 17

  1. Refer to the above diagram for athletic shoes. If the current output of shoes is Q1, then:

a.society would consider additional units of shoes to be more valuable than alternative products.

b.society would consider additional units of shoes to be less valuable than alternative products.

c.society would experience a net loss by producing more shoes.

d.resources are being allocated efficiently to the production of shoes.

  1. Which expression is another way of saying "marginal cost"?

a.total cost

b.additional cost

c.rational behavior

d.scarcity

  1. "The 'dollar votes' of consumers ultimately determine the composition of output and the allocation of resources in a market economy." This statement best describes the concept of:

a.the invisible hand.

b.derived demand.

c.consumer sovereignty.

d.market failure.

  1. Assume that you have $30 and live in a two product world. The products are bananas (cost = $2) and

screwdrivers (cost = $6). In the space below:

  1. Draw a budget line that demonstrates the economizing problem that you face. (3 points)

Identify a point on your graph that is currently unattainable.(1 point