AP Microeconomics Unit 1 practice questions
Try 10 multiple-choice questions from Unit 1 here. Pick an answer to see why it's right or wrong, then take the timed test above for a full AP-style set.
Question 1
Which statement best describes why scarcity is a fundamental problem for all economies, regardless of their level of wealth?
Resources are limited while human wants are unlimited.
Some economies have more resources than others, so wealthy nations do not face scarcity.
Production cannot meet demand because consumers want more goods than producers can supply.
Economic systems must choose which goods to produce because all resources have alternative uses.
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Answer: (A)
Scarcity is defined by the permanent imbalance between finite productive resources (land, labor, capital) and infinite human desires for goods and services.
Question 2
A student has two hours before a test. They can either study, which is expected to improve their grade by 10 points, or work at a job earning $30. If they choose to study, what is the opportunity cost?
The thirty dollars they would have earned working.
The ten points they gained on the test grade.
The two hours spent studying for the test.
The cost of transportation to the job site.
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Answer: (A)
Opportunity cost is the value of the next best alternative foregone. By choosing to study, the student gives up the $30 earnings.
Question 3
Which of the following best describes physical capital in the context of a commercial bakery?
The industrial ovens used to bake the bread.
The wheat flour used to make the dough.
The money used to pay the bakery staff.
The culinary skills possessed by the bakers.
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Answer: (A)
Physical capital consists of manufactured goods, such as machinery, tools, and buildings, used to produce other goods and services.
Question 4
Which of the following distinguishes the economic concept of scarcity from a market shortage?
Scarcity is a permanent condition, while a shortage is a temporary market disequilibrium.
Scarcity applies only to nature, while a shortage applies only to manufactured goods.
Scarcity is fixed by technology, while a shortage requires government intervention.
Scarcity results from high prices, while a shortage results from prices set too low.
Scarcity results from unlimited resources, while a shortage results from limited demand.
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Answer: (A)
Scarcity is the universal condition of limited resources; a shortage is a specific situation where quantity demanded exceeds quantity supplied at a given price.
Question 5
Which of the following best describes the role of entrepreneurship as a factor of production?
Organizing resources and assuming the risk of business failure.
Providing the manual labor required to operate machinery.
Supplying the financial assets needed to purchase materials.
Managing the daily administrative tasks within a corporation.
Developing new products and marketing them to consumers.
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Answer: (A)
Entrepreneurship involves the unique function of combining land, labor, and capital to create value and bearing the risks associated with production.
Question 6
Which of the following scenarios best illustrates an investment in human capital?
A company pays for employees to attend a coding workshop.
A factory purchases new robotic arms for the assembly line.
A government builds a new highway to improve logistics.
A farmer buys additional acreage to expand crop production.
A worker receives a raise in hourly wages for their current job.
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Answer: (A)
Human capital refers to the skills, knowledge, and experience possessed by individuals; training directly increases this stock.
Question 7
A city government decides to build a new park on a vacant lot instead of selling the land to a private developer. What is the opportunity cost of this decision?
The revenue the city would have received from selling the land.
The cost of construction materials needed to build the park.
The monthly maintenance expenses required for the park.
The increased property values for the surrounding homes.
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Answer: (A)
Opportunity cost is the value of the best alternative not chosen. Here, the foregone revenue from the sale is the cost of the park.
Question 8
Because resources are scarce, every economic system must answer three fundamental questions. Which of the following represents one of these questions?
For whom will the goods and services be produced?
When will the prices of goods and services stabilize?
Why do consumers prefer certain goods over others?
Where will the raw materials be sourced globally?
How will technological innovation affect production methods?
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Answer: (A)
The three basic economic questions driven by scarcity are: What to produce? How to produce? and For whom to produce?
Question 9
In economics, the factor of production classified as "land" includes which of the following?
Natural resources like water, minerals, and forests.
Agricultural machinery like tractors and harvesters.
Improvements made to real estate like fences and barns.
Intellectual property rights associated with seeds.
The buildings and structures constructed on agricultural property.
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Answer: (A)
In economics, 'land' encompasses all natural resources used in production, not just the physical ground.
Question 10
A store offers "free" samples of a product to customers. Why is this sample not considered "free" in an economic sense?
Resources with alternative uses were consumed to produce it.
The store incurs explicit monetary costs that must be recovered through sales.
Customers experience a psychological benefit that creates an implicit obligation to purchase.
The sample represents a transfer of ownership that requires legal documentation and processing.
The store must advertise the sample, incurring marketing costs that represent a real economic cost.
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Answer: (A)
There is no such thing as a free lunch; scarce resources (labor, materials) were used to make the sample, creating an opportunity cost.
What's on the AP Microeconomics Unit 1 practice test
The standard version takes about 63 minutes and follows the timing and directions of the AP exam, sized to one unit:
- 20 Multiple Choice Questions (23 minutes)
- 1 FRQ – FRQ 1 – Long (20 minutes)
- 1 FRQ – FRQ 2 – Short (20 minutes)
Questions are drawn from 1350 multiple-choice questions and 50 FRQs written for Unit 1, Basic Economic Concepts.
Practice AP Microeconomics Unit 1 FRQs
Answer the unit's free-response questions one at a time and get a score on every part.
- FRQ 1 – Long (19 questions)
- FRQ 2 – Short (18 questions)
- FRQ 3 – Short (13 questions)
Review Unit 1 before you start
- 1.1 Basic Economic Concepts: Scarcity
- 1.2 Resource Allocation and Economic Systems
- 1.3 Production Possibilities Curve (PPC)
- 1.4 Comparative Advantage and Trade
- 1.5 Cost-Benefit Analysis
- 1.6 Marginal Analysis and Consumer Choice