AP Economics Exam Vocab Review
||Latest Exam
Economics -Answer The study of how people seek to satisfy their needs and wants by
making choices
Ceteris Paribus -Answer a Latin phrase that means "all other things held constant"
Macroeconomics -Answer the study of economy-wide phenomena, including inflation,
unemployment, and economic growth
marginal analysis -Answer analysis that involves comparing marginal benefits and
marginal costs
Utility -Answer Ability or capacity of a good or service to be useful and give
satisfaction to someone.
3 basic economic questions -Answer What to produce? How to produce? For whom to
produce?
Economic Resources -Answer the means through which goods and services are
produced
4 factors of production -Answer land, labor, capital, entrepreneurship
investment -Answer spending on capital equipment, inventories, and structures,
including household purchases of new housing
full employment -Answer the condition in which virtually all who are able and willing to
work are employed.
full production -Answer Employment of available resources so that the maximum
amount of (or total value of) goods and services is produced; occurs when both
productive efficiency and allocative efficiency are realized.
allocative efficiency -Answer A state of the economy in which production is in
accordance with consumer preferences; in particular, every good or service is produced
up to the point where the last unit provides a marginal benefit to society equal to the
marginal cost of producing it
, productive efficiency -Answer a situation in which a good or service is produced at the
lowest possible cost
consumer goods -Answer products and services that satisfy human wants directly
capital goods -Answer Buildings, machines, technology, and tools needed to produce
goods and services.
production possibilities frontier -Answer a graph that shows the combinations of
output that the economy can possibly produce given the available factors of production
and the available production technology
opportunity cost -Answer the most desirable alternative given up as the result of a
decision
Laissez-faire -Answer Idea that government should play as small a role as possible in
economic affairs.
command economy -Answer An economic system in which the government controls a
country's economy.
Traditional Economy -Answer An economy in which production is based on customs
and traditions and economic roles are typically passed down from one generation to the
next.
resource market -Answer a market in which households sell and firms buy resources
or the services of resources
product market -Answer the market in which households purchase the goods and
services that firms produce
increasing opportunity cost -Answer the opportunity cost of producing additional units
of a good rises as society produces more of that good
Constant Opportunity Cost -Answer An opportunity cost that remains the same as
consumers shift purchases from one product to another along a straight-line budget line.
economic growth -Answer the ability of the economy to increase the production of
goods and services
Scarcity -Answer A situation in which unlimited wants exceed the limited resources
available to fulfill those wants
||Latest Exam
Economics -Answer The study of how people seek to satisfy their needs and wants by
making choices
Ceteris Paribus -Answer a Latin phrase that means "all other things held constant"
Macroeconomics -Answer the study of economy-wide phenomena, including inflation,
unemployment, and economic growth
marginal analysis -Answer analysis that involves comparing marginal benefits and
marginal costs
Utility -Answer Ability or capacity of a good or service to be useful and give
satisfaction to someone.
3 basic economic questions -Answer What to produce? How to produce? For whom to
produce?
Economic Resources -Answer the means through which goods and services are
produced
4 factors of production -Answer land, labor, capital, entrepreneurship
investment -Answer spending on capital equipment, inventories, and structures,
including household purchases of new housing
full employment -Answer the condition in which virtually all who are able and willing to
work are employed.
full production -Answer Employment of available resources so that the maximum
amount of (or total value of) goods and services is produced; occurs when both
productive efficiency and allocative efficiency are realized.
allocative efficiency -Answer A state of the economy in which production is in
accordance with consumer preferences; in particular, every good or service is produced
up to the point where the last unit provides a marginal benefit to society equal to the
marginal cost of producing it
, productive efficiency -Answer a situation in which a good or service is produced at the
lowest possible cost
consumer goods -Answer products and services that satisfy human wants directly
capital goods -Answer Buildings, machines, technology, and tools needed to produce
goods and services.
production possibilities frontier -Answer a graph that shows the combinations of
output that the economy can possibly produce given the available factors of production
and the available production technology
opportunity cost -Answer the most desirable alternative given up as the result of a
decision
Laissez-faire -Answer Idea that government should play as small a role as possible in
economic affairs.
command economy -Answer An economic system in which the government controls a
country's economy.
Traditional Economy -Answer An economy in which production is based on customs
and traditions and economic roles are typically passed down from one generation to the
next.
resource market -Answer a market in which households sell and firms buy resources
or the services of resources
product market -Answer the market in which households purchase the goods and
services that firms produce
increasing opportunity cost -Answer the opportunity cost of producing additional units
of a good rises as society produces more of that good
Constant Opportunity Cost -Answer An opportunity cost that remains the same as
consumers shift purchases from one product to another along a straight-line budget line.
economic growth -Answer the ability of the economy to increase the production of
goods and services
Scarcity -Answer A situation in which unlimited wants exceed the limited resources
available to fulfill those wants
