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Quizzes > High School Quizzes > Social Studies

Unit 1 AP Lit Practice Quiz

Sharpen exam skills with MCQ progress checks

Difficulty: Moderate
Grade: Grade 12
Study OutcomesCheat Sheet
Colorful paper art promoting the AP Eco Unit Challenge trivia quiz for high school students.

What does the law of demand state?
As price increases, quantity demanded increases.
As price increases, quantity demanded decreases.
Both price and quantity demanded increase together.
Price changes have no impact on quantity demanded.
The law of demand indicates an inverse relationship between price and quantity demanded, meaning that as the price rises, the quantity demanded typically falls. This relationship is a fundamental concept in economics.
Which of the following is an example of opportunity cost?
The monetary cost of a purchased good.
Paying the price tag in a store.
Choosing between two goods with equal benefits.
Spending an evening watching a movie instead of studying for an exam.
Opportunity cost represents the value of the next best alternative that is forgone when making a decision. Choosing to watch a movie instead of studying highlights what is sacrificed in terms of study time and potential learning.
Which of the following best defines scarcity in economic terms?
Resources that are in abundant supply.
A surplus of goods in the market.
Unlimited resources and limited wants.
Limited resources and unlimited wants.
Scarcity signifies a situation where available resources are insufficient to meet all the wants and needs. This fundamental economic problem forces individuals and societies to make choices.
What is a market equilibrium?
A situation where quantity supplied exceeds quantity demanded.
A situation where quantity demanded exceeds quantity supplied.
A situation where the government intervenes to set prices.
A situation where quantity supplied equals quantity demanded.
Market equilibrium occurs when the quantity supplied by producers equals the quantity demanded by consumers. This state ensures that there is neither surplus nor shortage in the market.
What does GDP measure in an economy?
The total income earned by the government.
The total value of all goods produced for export.
The wealth of the top 10% of the population.
The total value of all finished goods and services produced within a country in a given period.
GDP, or Gross Domestic Product, measures the total market value of all finished goods and services produced within a country's borders over a specific time period. It is a key indicator of a nation's economic performance.
If the price of a substitute good increases, what is likely to happen to the demand for the related good?
It will increase, as consumers switch to the relatively cheaper alternative.
It will decrease, due to overall market fear.
It will remain unchanged.
It will become unpredictable.
An increase in the price of a substitute causes consumers to seek the relatively cheaper option, thereby increasing its demand. This substitution effect is a common economic response in competitive markets.
How does a price ceiling set below equilibrium affect the market?
It increases the equilibrium price.
It results in a surplus of goods.
It leads to a shortage, as quantity demanded exceeds quantity supplied.
It has no impact on market conditions.
A price ceiling below equilibrium prevents the market from reaching its natural balance, creating a situation where demand outstrips supply. This often results in persistent shortages and inefficiencies in the market.
When production costs increase, what is the likely effect on the supply curve for a good?
It shifts to the left, indicating a decrease in supply.
It shifts to the right, indicating an increase in supply.
It becomes horizontal.
It remains unchanged.
Higher production costs typically reduce the profitability of producing goods, causing producers to supply less at each price level. This results in a leftward shift of the supply curve.
What best describes price elasticity of demand?
A measure of how much quantity demanded changes in response to a change in price.
A measure of consumer income changes.
A measure of the change in production with changing prices.
A fixed ratio between price and quantity demanded.
Price elasticity of demand quantifies how responsive the quantity demanded of a good is to a change in its price. A higher elasticity indicates greater sensitivity to price fluctuations.
Which of the following can cause a shift in the demand curve?
A change in the good's own price.
Short-term fluctuations in supply.
A temporary discount sale.
A change in consumer income.
Factors such as changes in consumer income can shift the entire demand curve, as they alter consumers' purchasing power or preferences. A change in the good's price causes movement along the curve rather than a shift.
What does the concept of comparative advantage explain?
It explains how specializing in producing goods for which a country has a lower opportunity cost benefits everyone.
It indicates that only countries with abundant resources should trade.
It shows that a country should produce everything domestically.
It suggests that absolute production is more important than opportunity cost.
Comparative advantage is the principle where countries or individuals benefit from specializing in goods or services they can produce at a lower opportunity cost. This leads to more efficient production and mutually beneficial trade.
Which economic indicator is most commonly used to gauge overall economic output?
Unemployment rate.
Balance of trade figures.
Gross Domestic Product (GDP).
Consumer Price Index (CPI).
GDP is the most widely recognized indicator of a country's economic output, as it sums the value of all finished goods and services produced over a given period. It provides a broad measure of economic activity and health.
What is the multiplier effect in fiscal policy?
It implies that government spending only benefits a specific sector.
It describes how tax cuts result in equal reductions in government revenue.
It refers to the phenomenon where initial government spending leads to a larger overall increase in national income.
It means that spending has no additional effect on the economy.
The multiplier effect demonstrates that an initial injection of spending can have a multiplied impact on overall national income. This effect is a rationale for using fiscal stimulus to boost economic activity during downturns.
In a perfectly competitive market, which of the following is a characteristic?
High barriers to entry restricting competition.
Significant product differentiation among competitors.
Numerous buyers and sellers with no single party able to influence the market price.
A single seller dominating the market.
A perfectly competitive market is defined by the presence of many buyers and sellers, none of whom has the power to set prices. The products are homogeneous, and free entry and exit characterize the market.
What role does price play in a market economy?
It has little to no impact on economic decision making.
It signals supply and demand conditions and guides resource allocation.
It only benefits the producers.
It is set arbitrarily by companies.
In a market economy, price acts as a signal that reflects the interaction of supply and demand. This information guides both consumers and producers in their decision making regarding resource allocation.
How does an increase in the money supply typically affect interest rates and investment?
It raises interest rates and reduces investment.
It has no significant effect on interest rates.
It lowers interest rates and boosts investment.
It lowers interest rates but discourages investment.
An increase in the money supply generally decreases interest rates because there is more capital available for lending. Lower interest rates tend to encourage borrowing and investment, thereby stimulating economic growth.
What is the long-run impact of a sustainable increase in productivity on economic growth?
It causes immediate inflation without real growth.
It leads to a decrease in employment due to automation.
It benefits only the technology sector without broader implications.
It increases potential output and shifts the production possibilities frontier outward.
A sustained increase in productivity enhances the efficiency with which an economy uses its inputs, leading to a higher potential output. This improvement shifts the production possibilities frontier outward, signaling long-run economic growth.
Which of the following best explains the concept of a 'market failure'?
When the free market fails to allocate resources efficiently, leading to a net social welfare loss.
When government interventions lead to unintended consequences in resource allocation.
When monopolies successfully control market supply for profit maximization.
When all market participants act in self-interest, ensuring optimal outcomes.
Market failure occurs when the free market does not allocate resources in an optimal manner, resulting in inefficiencies and a loss of social welfare. This can happen due to externalities, public goods, or information asymmetries.
How does the concept of 'externality' impact market outcomes?
They cause market inefficiencies by not reflecting the true costs or benefits in prices.
They result in perfect competition by balancing positive and negative effects.
They ensure that all costs are internalized by producers.
They primarily affect government spending without altering market supply.
Externalities occur when a third party is affected by an economic transaction without having a role in the decision making. This leads to market inefficiencies as the social costs or benefits are not reflected in market prices.
Which scenario best illustrates the concept of diminishing marginal returns?
Adding additional labor to a fixed amount of capital eventually produces smaller increments in output.
Increasing resources without limits leads to proportional output increases.
Increasing both labor and capital proportionally always results in constant marginal returns.
Substituting labor with technology immediately doubles output.
Diminishing marginal returns occur when, after a certain point, each additional unit of a variable input (like labor) produces less additional output, while other inputs remain fixed. This concept reflects the decreasing effectiveness of additional inputs in production.
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Study Outcomes

  1. Analyze fundamental economic principles and their application in real-world contexts.
  2. Interpret supply and demand interactions to assess market dynamics.
  3. Evaluate the impact of fiscal and monetary policies on economic outcomes.
  4. Apply economic theories to solve practical problems and case studies.
  5. Understand the role of market structures in shaping competitive environments.

AP Lit Unit 1 Progress Check MCQ Cheat Sheet

  1. Understanding Scarcity and Opportunity Cost - Every decision means giving something up because resources are limited - this is scarcity in action! Opportunity cost is the value of the next best alternative you didn't choose. For example, if you spend your Friday night binge‑watching instead of studying, the study time you lost is your opportunity cost. OpenStax: Key Concepts
  2. Grasping the Production Possibilities Curve (PPC) - The PPC is like a treasure map showing the maximum combination of two goods an economy can produce when everything's running smoothly. Points inside the curve mean you're wasting resources, while points outside are simply out of reach. Picture choosing between making pizzas or burgers - PPC helps you see the trade‑offs! OpenStax: Key Concepts
  3. Distinguishing Between Microeconomics and Macroeconomics - Think of micro as zooming in on individual households or firms and macro as stepping back to view the whole economy. Micro tracks supply and demand in specific markets, while macro tackles big issues like inflation, unemployment, and GDP growth. Both lenses are vital for spotting patterns and making smart policy. OpenStax: Key Concepts
  4. Recognizing Different Economic Systems - How a society decides who gets what defines its economic system: traditional, command, market, or mixed. Traditional relies on customs, command on central planners, market on individual choice, and mixed on a blend. Knowing each helps you understand why countries vary in wealth and freedom. OpenStax: Key Concepts
  5. Applying the Law of Demand and Supply - When prices drop, people want more - that's the law of demand. When prices rise, producers are eager to supply more - that's the law of supply. Together, these forces determine everything from the price of concert tickets to your favorite snack's cost. Exam 1 Review
  6. Calculating Elasticity - Elasticity measures how sensitive buyers or sellers are to price changes. Price elasticity of demand equals the percent change in quantity demanded divided by the percent change in price. A very elastic good sees big demand swings with small price tweaks (think luxury items), while inelastic goods barely budge (like insulin). Exam 1 Review
  7. Understanding Market Equilibrium - Equilibrium is where supply meets demand, and the market "likes" the price - no shortages, no surpluses. Shift demand or supply curves, and the balance tips, causing prices to rise or fall. Master this, and you'll predict price moves like a pro! Exam 1 Review
  8. Recognizing the Role of Incentives - Incentives are the carrots and sticks guiding choices - rewards or penalties that steer behavior. Whether it's a grades‑based bonus or a tax penalty, incentives shape everything from your study habits to a company's investment strategy. Spot them, and you can predict outcomes! Exam 1 Review
  9. Exploring Comparative and Absolute Advantage - Absolute advantage means you're simply the best at producing something. Comparative advantage means you give up less of another good to make it. By specializing based on these advantages, countries and people trade and benefit more than they would alone. Exam 1 Review
  10. Understanding Marginal Analysis - Marginal analysis asks, "What happens if I do one more (or one less) of something?" It focuses on extra benefits versus extra costs. When the marginal benefit equals the marginal cost, you've hit the optimal choice - no resource wasted! Exam 1 Review
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