AP Economics:
PPC, Comparative Advantage and Marginal Utility Review MCs
May 1, 2014
1. In which way does a straight-line PPC differ from a concave production possibilities
curve?
a. A straight-line production possibilities curve has a decreasing opportunity cost line.
b. A straight-line production possibilities curve has a constant opportunity cost.
c. A straight-line production possibilities curve has an increasing opportunity cost.
d. A straight-line production possibilities curve does not show opportunity cost.
e. There is no difference between the two production curves.
Refer to the below chart for questions 2-4
2. If the country is currently producing at point B, it can produce more of Good X by doing
which of the following?
a. Moving to Point C
b. Moving to Point A
c. Moving to Point D
d. Moving to Point E
e. Remaining at Point B
3. How might Point E be obtained?
a. If the country’s resources were more fully employed
b. If the country’s resources were shifted to encourage more efficient use of scarce
resources
c. If improvements in technology occurred in the production of either Good X or Y
d. If firms decreased their use of Good X
e. If the nation used more its scare resources to produce Good y
4. Which of the following would cause an outward or rightward shift in the PPC?
a. An increase in employment
b. An increase in inflation
c. An increase in capital equipment
d. A decrease in natural resources
e. A decrease in the number of workers
5. According to the theory of comparative advantage, a good should be produced where
a. Its explicit costs are least
b. Its opportunity costs are least
c. The cost of real resources used is least
d. Production can occur with the greatest increase in employment
e. Production can occur with the lowest increase in employment
6. Generally, each successive unit of a good consumed will cause marginal utility to
a. Increase at an increasing rate
b. Increase at a decreasing rate
c. Increase at a constant rate
d. Decrease
e. Either increase or decrease
7. Assume there are two goods, Good X and Good Y. Good X costs $5 and Good Y costs
$10. If your income is $200, which of the following combinations of Good X and Good Y
is on your budget line?
a. 0 units of Good X and 18 units of Good Y
b. 0 units of Good X and 20 units of Good Y
c. 20 units of Good X and 0 units of Good Y
d. 10 units of Good X and 12 units of Good Y
e. All of the above
8. The optimal consumption rule states that total utility is maximized when all income is
spent and
a. MU/P is equal for all goods
b. MU is equal for all goods
c. P/MU is equal for all goods
d. MU is as high as possible for all goods
e. The amount spent on each good is equal
9. A consumer is spending all of her income and receiving 100 utils form the last unit of
good A and 80 utils from the last unit of Good B. If the price of A is $2 and the price of
Good B is $1, to maximize total utility the consumer should buy
a. More of Good A
b. More of Good B
c. Less of Good B
d. More of both goods
e. Less of both goods
10. Which of the following statements best reflects the law of diminishing marginal utility?
a. “I have to have a scoop of ice cream on my pie”
b. “I’ll never get tired of your cooking”
c. The last bite tastes just as good as the first”
d. “I couldn’t eat another doughnut if you paid me”
e. “I prefer to eat several small meals a day, rather than three large ones”