AP Microeconomics UPDATED ACTUAL Questions and CORRECT Answers
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AP Microeconomics
Institution
AP Microeconomics
AP Microeconomics UPDATED ACTUAL
Questions and CORRECT Answers
Economics - CORRECT ANSWER- The study of how people, firms, and societies use
their scarce productive resources to best satisfy their unlimited material wants.
Resources - CORRECT ANSWER- Factors of production, 4 categories: labor...
AP Microeconomics UPDATED ACTUAL
Questions and CORRECT Answers
Economics - CORRECT ANSWER✔✔- The study of how people, firms, and societies use
their scarce productive resources to best satisfy their unlimited material wants.
Resources - CORRECT ANSWER✔✔- Factors of production, 4 categories: labor, physical
capital, land/natural resources, and entrepreneurial ability
Scarcity - CORRECT ANSWER✔✔- The imbalance between limited productive resources
and unlimited human wants
Opportunity Cost - CORRECT ANSWER✔✔- The most desirable alternative given up as the
result of a decision
Marginal Benefit (MB) - CORRECT ANSWER✔✔- The additional benefit received from the
consumption of the next unit of a good or service
Marginal Cost (MC) - CORRECT ANSWER✔✔- The additional cost incurred from the
consumption of the next unit of a good or a service
Marginal Analysis - CORRECT ANSWER✔✔- The rational decision maker chooses an
action if MB ≥ MC
Law of Increasing Costs - CORRECT ANSWER✔✔- The more of a good that is produced,
the greater the opportunity cost of producing the next unit of that good
Absolute Advantage - CORRECT ANSWER✔✔- Exists if a producer can produce more of a
good than all other producers
Comparative Advantage - CORRECT ANSWER✔✔- Exists if a producer can produce a good
at lower opportunity cost than all other producers
, Specialization - CORRECT ANSWER✔✔- When firms focus their resources on production
of goods for which they have comparative advantage
Productive Efficiency - CORRECT ANSWER✔✔- Production of maximum output for a
given level of technology and resources. All points on the PPF are productively efficient
Allocative Efficiency - CORRECT ANSWER✔✔- Production of the combination of goods
and services that provides the most net benefit to society. The optimal quantity of a good is
achieved when the MB = MC of the next unit and only occurs at one point on the PPF
Economic Growth - CORRECT ANSWER✔✔- Occurs when an economy's production
possibilities increase. This can be a result of more resources, better resources, or
improvements in technology.
Market Economy (Capitalism) - CORRECT ANSWER✔✔- An economic system based upon
the fundamentals of private property, freedom, self-interest, and prices
Law of Demand - CORRECT ANSWER✔✔- Holding all else equal, when the price of a
good rises, consumers decrease their quantity demanded for that good
Absolute prices - CORRECT ANSWER✔✔- The price of a good measured in units of
currency
Relative Prices - CORRECT ANSWER✔✔- The number of units of any other good Y that
must be sacrificed to acquire good X. Only relative prices matter
Substitution Effect - CORRECT ANSWER✔✔- The change in quantity demanded resulting
from a change in the price of one good relative to other goods
Income Effect - CORRECT ANSWER✔✔- The change in quantity demanded that results
from a change in the consumer's purchasing power (or real income)
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