AP AP Economics & Government 1 — Questions and Answers
Question 1: In AP Microeconomics, what does the law of demand state?
- As price increases, quantity demanded increases
- As price decreases, quantity demanded decreases
- As price increases, quantity demanded decreases (Correct answer)
- Price and demand are unrelated
Correct answer: As price increases, quantity demanded decreases
The law of demand states that, holding all else equal, as the price of a good rises, consumers buy less of it.
Question 2: Which type of market structure features many sellers offering identical products with no barriers to entry?
- Monopoly
- Oligopoly
- Perfect competition (Correct answer)
- Monopolistic competition
Correct answer: Perfect competition
Perfect competition has many sellers, identical products, free entry and exit, and no single firm can influence price.
Question 3: In AP Macroeconomics, what does GDP measure?
- The total value of goods and services produced in a country in a given period (Correct answer)
- The total government spending in a year
- A country's total exports minus imports
- The average income per citizen
Correct answer: The total value of goods and services produced in a country in a given period
GDP (Gross Domestic Product) measures the total monetary value of all finished goods and services produced within a country in a specific time period.
Question 4: What is opportunity cost?
- The monetary price of a good
- The value of the next best alternative forgone when making a choice (Correct answer)
- The total cost of production
- The cost of raw materials
Correct answer: The value of the next best alternative forgone when making a choice
Opportunity cost is the value of the best alternative you give up when making an economic decision.
Question 5: Which branch of the U.S. federal government has the power to declare laws unconstitutional?
- Legislative
- Executive
- Judicial (Correct answer)
- Administrative
Correct answer: Judicial
The judicial branch, particularly the Supreme Court, exercises judicial review to strike down laws that violate the Constitution.
Question 6: What is the primary function of the Federal Reserve in the United States?
- To collect federal taxes
- To manage monetary policy and regulate the banking system (Correct answer)
- To pass the federal budget
- To negotiate trade agreements
Correct answer: To manage monetary policy and regulate the banking system
The Federal Reserve manages U.S. monetary policy by controlling money supply and interest rates to promote economic stability.
AP AP Economics & Government 1
In AP Microeconomics, what does the law of demand state?