AP Economics
Unit 1: Basic Economic Concepts
1. _____/4
2. _____/20
3. _____ / 8
TOTAL: ______/32 = _______%
Study Guide
1. Basic Introductory Concepts (4 points)
a. Define economics: (1 point)
b. What is the difference between macroeconomics and microeconomics? (1 point)
c. What are incentives, and how do they relate to choices? (2 points)
EOCT Standard Concepts
2. SSEF1 (17 points)
The student will explain why limited productive resources and unlimited wants result in scarcity,
opportunity costs, and tradeoffs for individuals, businesses, and governments.
a. Define scarcity.(2 points)
b. How is scarcity related to choices and trade-offs? (3 points)
c. What is the difference between scarcity and a shortage? (2 points)
d. Define opportunity cost. (2 points)
e. What is the opportunity cost of your decision to give up your Saturday night date that will
cost $40 to spend the evening taking care of your sick grandmother? Give you answer AND
explain how you know it is the answer. (2 points)
f. What does the term “allocate” mean? (1 point)
g. List AND define each of the four factors of production (4 points).
h. Give an example for each of the four factors of production (4 points)
3. SSEF2 (8 points)
The student will give examples of how rational decision making entails comparing the marginal
benefits and the marginal costs of an action.
a. Define the term “marginal”. (2 points)
b. A rational decision occurs when the marginal benefit of an action
________________________ the marginal cost of the action. (2 points)
c. Complete the chart using MARGINAL ANALYSIS. (4 points)
Hours Studying
Hours at Pool
Grade on Test
Marginal Benefit Marginal Cost
O hours
3 hours
60
--------------------------------1 hour
2 hours
78
18 points
1 hour at pool
2 hours
1 hour
87
3 hours
0 hours
91
d. In the example above, discuss where YOUR rational decision would be and HOW you used
marginal analysis to come to that decision. (2 points)
1.
2.
3.
4.
AP Economics
Unit 1: Basic Economic Concepts
__________/7
__________/2
__________/2
__________/2
Total: _______/13 = _______%
Study Guide Problem Set #2
SSEF2: Illustrate by means of a production possibilities curve the tradeoffs between two options.
B
A
E
C
F
D
1. Complete each of the following tasks using Figure 1 above.
a. How is the concept of scarcity illustrated on the PPC above? (1 point)
b. What trade-offs are shown on the PPC above? (2 points)
c. What do points A, B, C, and D have in common? (1 point)
d. What is happening at point F? (1 point)
e. What is happening at point E? (1 point)
f. What is the opportunity cost of moving from point A to point B? (1 point)
2. Assume that there is a major change in agricultural technology that leads to a greater supply
of food products. Re-draw the graph above and show the shift that would occur (2 points).
Note** You DO NOT have to draw the numbers, just the general shape of the curve and label
the axes.
3. Assume that the society above can no longer obtain the natural resources it needs to build
weapons of mass destruction. Re-draw the graph and show the shift that would occur (2
points).
4. Assume that the society above experiences an educational revolution that leads to a great
number of new scientists in technological fields who make great discoveries. Re-draw the
graph and show the shift that would occur. (2 points)
1. _____/6
2. _____/6
3. _____/3
AP Economics
4. _____/10
Unit 1: Basic Economic Concepts
Total: ________/25 = _______%
Study Guide Problem Set #3
1. SSEF3 Specialization and Voluntary Exchange
a. Give two examples of how individuals and/or businesses specialize. (2 points)
b. What does the phrase “voluntary exchange” mean? (1 point)
c. What does it mean for exchange to be “non-fraudulent”? (1 point)
d. Explain why both parties who engage in voluntary, non-fraudulent exchange benefit. (2
points)
2. SSEF6 Productivity and Economic Growth
a. Define productivity (1 point)
b. How does increased productivity lead to economic growth? (2 points)
c. List three specific ways societies can improve their productivity. (3 points)
3. SSEIN1 Comparative and Absolute Advantage
a. Define comparative advantage (1 point)
b. Define absolute advantage. (1 point)
c. State the Law of Comparative Advantage. (1 point)
4. SSEIN1 Comparative Advantage Application
Yearbook Staff Members
Captions Written per Hour
Sara
Rob
4
8
Pictures Cropped and Pasted
per Hour
5
8
a. Who has the absolute advantage in cropping and pasting pictures? How do you know? (2
points)
b. Calculate the opportunity cost for each yearbook member in each activity. SHOW YOUR
WORK. ( 4 points)
c. Who has the comparative advantage in writing captions? How do you know? (2 points)
d. Who has the comparative advantage in cropping pictures? How do you know? (2 points)
AP Economics
Unit 2: Economic Systems
Study Guide
1. General Background
a. What is an economic system?
b. List the three basic economic questions that all societies must answer.
2. Define each of the following broad social goals:
a. Economic efficiency
b. Economic freedom
c. Economic growth
d. Economic stability
e. Economic equity
f.
Economic security
3. Characteristics of Economic Systems: Answer each of the following in a short paragraph.
a. What characterizes a command economy in terms of the three basic questions? Which
goals are the highest priorities in a command economy? Which social goals are hardest
to achieve in a command economy?
b. Characterizes a market economy in terms of the three basic questions? Which goals are
the highest priorities in a market economy? Which social goals are hardest to achieve in
a market economy?
AP Economics
Unit 2: Economic Systems
Study Guide
SSEF4 – Contrast the different economic systems.
SSEMI1- Illustrate by means of a circular flow diagram the flow of goods, services, and money
between households and businesses.
1. Command Economies
a. Why are command economies also called centrally-planned economies?
b. In 3-5 sentences, discuss why many command economies, such as the former Soviet
Union, experienced severe economic problems.
2. Market Economies
a. How are resources, goods and services allocated in a market economy?
c. Explain the role of the “invisible hand” in a market economy.
d. Define each of the following and explain their importance in a market economy.
i.
Private Ownership
ii. Profit Motive
iii. Consumer Sovereignty
iv. Competition
3. Circular Flow of a Market Economy
a. Explain the role of each of the following in the circular flow.
i. Households
ii. Firms
iii. Product Market
iv. Factor or Resource Market
v. Monetary Flow (Money)
b. Construct a circular flow model labeling each of the following parts.
i. Households
ii. Firms
iii. Factors of Production
iv. Monetary Flow (Income)
v. Goods and Services
vi. Monetary Flow (Products)
vii. Factor Market
viii. Product Market
AP Economics
Unit 2: Economic Systems
Study Guide
SSEF5 – The student will describe the roles of government in a market economy.
1. When government gets involved in a market, what type of economic system is created? (1
point)
2. Redistribution of Income (5 points)
a. Which of the broad social goals is a society trying to reach when the government
redistributes income? (2 points)
b. Identify three ways the government redistributes income. (3 points)
3. Protecting Private Property Rights (6 points)
a. What is the difference between physical and intellectual property? (1 point)
b. What is the primary reason for government protecting intellectual property? (1 point)
d. Explain why pharmaceuticals are so expensive. (2 points)
e. Why would it be good to assign ownership to endangered animals? (2 points)
4. Market Failures (Externalities) (9 points)
a. What is an externality? (1 point)
b.
Why is an externality a market failure? (1 point)
c.
Give an example of a positive externality. (1 point)
e.
What might government do to encourage positive externalities? (1 point)
f.
Give an example of a negative externality. (1 point)
f.
What might government do to encourage negative externalities? (1 point)
g.
In 3-5 sentences, discuss how government can step in to mitigate the negative
externality of second-hand smoke. (3 points)
5. Regulation and Deregulation (6 points)
a. What is regulation? (1 point)
b. What is deregulation? (1 point)
c. What are the effects of regulations on businesses? (2 points)
e. What are the effects of regulations on consumers? (2 points)
6. Providing Public Goods and Services (7 points)
a. What is the free rider problem? (1 point)
b. What characterizes a public good? (2 points)
c. Give two examples of public goods. (2 points)
d. Why might government seek to tax everyone to provide a service as a public good? (2
points)