AP European History : Commerce; Economics; Market Competition

Study concepts, example questions & explanations for AP European History

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Example Questions

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Example Question #1 : Commerce; Economics; Market Competition

The late-eighteenth-century idea that an overgrowth in population would inevitably lead to famine and disease is known as __________.

Possible Answers:

the Malthusian catastrophe

the Hegelian dialectic

the categorical imperative

the invisible hand

Cartesian dualism

Correct answer:

the Malthusian catastrophe

Explanation:

Thomas Robert Malthus was an English cleric and economist who wrote An Essay on the Principle of Population in 1798, initially under a pseudonym. Malthus argued in his essay that the increasing population of Great Britain would be unable to feed itself with its current agricultural output and would face famine and disease, a condition known as "the Malthusian catastrophe." Malthus' predictions did not come to pass largely because of the technological advances of the Industrial Revolution and the Agricultural Revolution.

Example Question #2 : Commerce; Economics; Market Competition

Mercantalism is best described as an economic system where  __________.

Possible Answers:

laissez-faire capitalism is encouraged by a lack of government intervention

corporations are tightly controlled by government regulation

private property and the means of production is owned by the government

the government regulates the economic interests of a country through protectionism

taxes are lowest on the upper class to encourage private investment and innovation

Correct answer:

the government regulates the economic interests of a country through protectionism

Explanation:

Mercantalism was the primary economic policy of most European nations during the age of European colonialism and exploration and lasted until the innovations of the Industrial Revolution. Mercantalism is a system of government designed to promote a favorable balance of trade in the home country by exploiting colonies. The government regulates the economic interests of the country by engaging in protectionism.

Example Question #1 : Commerce; Economics; Market Competition

The Iron Law of Wages states that __________.

Possible Answers:

In the long term, the amount paid to a worker will always tend towards the minimum needed to keep the worker alive and working.

The working class can only effect improvements to real wages through the electoral process of democracy.

In the long term, the real value of wages will steadily rise to reflect the growing demands of the working class.

Wages will never improve unless the middle and upper classes are motivated to do so by the threat of revolution.

Wages cannot improve unless the working class takes it upon itself to collectively work for better pay and favorable government policies.

Correct answer:

In the long term, the amount paid to a worker will always tend towards the minimum needed to keep the worker alive and working.

Explanation:

The Iron Law of Wages is an important principle of capitalist economics usually credited to David Ricardo, although sometimes it is credited to Thomas Malthus. It states that in the long term, the amount of money that a worker receives for labor will always tend towards the bare minimum needed to keep the worker alive and working.

Example Question #2 : Commerce; Economics; Market Competition

Britain embraced free market trade when __________.

Possible Answers:

they needed ideological support for the First World War

they were forced to do so by the United States

the age of European exploration began

their control over the seas and global commerce made doing so advantageous

the Industrial Revolution had already spread to the United States and many other countries in Western Europe

Correct answer:

their control over the seas and global commerce made doing so advantageous

Explanation:

Britain, like most other countries at the time, embraced mercantalism in the initial period of European colonialism and expansion; however, the British switched their economic policy to the promotion of free market capitalism once their naval power and commercial might made doing so advantageous. This has been widely criticized by politicians and thinkers in other countries who decry Britain’s emphasis on “fairness” and “economic equality” when, from their perspective, the British only embraced it themselves after they had become wealthy from the exploitation of other countries' raw resources and peoples.

Example Question #5 : Commerce; Economics; Market Competition

The banking revolution emerged first in __________.

Possible Answers:

Germany 

The Netherlands

Great Britain

France 

Sweden

Correct answer:

The Netherlands

Explanation:

Banking, as we generally understand it, can be loosely traced to the Italian city-states at the height of the Italian Renaissance; however, it did not really emerge as an institution that could extend credit and support corporations until the banking revolution that began in the Dutch Republic in the seventeenth and eighteenth centuries and quickly spread to Britain and then around Western Europe.

Example Question #3 : Commerce; Economics; Market Competition

The Wealth of Nations was written by __________.

Possible Answers:

David Ricardo

Adam Smith

John Locke

Thomas Malthus

Thomas Hobbes

Correct answer:

Adam Smith

Explanation:

Adam Smith is one of the most influential economists in European history. His magnum opus The Wealth of Nations was published in 1776 and is one of the earliest-known works advocating for free-market laissez-faire capitalism. It also touches on issues like division of labor, class structure, and government intervention in the economy.

Example Question #7 : Commerce; Economics; Market Competition

What was the significance of the Zollverein?

Possible Answers:

It was the first known economic union between two states that were not politically unified in European history.

It is the name given to the German unification movement.

It was the first known instance of a Holy Roman elector choosing to elect someone other than a Hapsburg since the fifteenth century.

It led to widespread civil strife and the rise of both socialism and fascism in Germany.

It was a reforming movement designed to improve urban life in the Austro-Hungarian Empire.

Correct answer:

It was the first known economic union between two states that were not politically unified in European history.

Explanation:

The Zollverein is the name given to a movement to unify the economies of several German states in the nineteenth century several decades prior to German political unification. It was an organization set up to manage tariffs and control economic policy between the various German states. The Austrian Empire was notably not included. It is the earliest-known European example of an economic union that was not accompanied or preceded by a political union.

Example Question #8 : Commerce; Economics; Market Competition

Which of these best describes why Britain began prioritizing the sale of opium to China in the mid-nineteenth century?

Possible Answers:

All of these answers

None of these answers

To weaken Chinese administration and society

To create a favorable balance of trade

To provide impetus for an alliance against the French

Correct answer:

To create a favorable balance of trade

Explanation:

In the early nineteenth century, Britain found itself in the unique position, at the time, of importing more from China than it was exporting. An unfavorable balance of trade, from the British perspective, was emerging and worsening over time. In an attempt to remedy this, the British decided to begin prioritizing the sale of opium to China in the knowledge that it was highly addictive and would result in extensive and consistent profits for the British, which would help balance the trading relationships between the two countries in Britain’s favor.

Example Question #4 : Commerce; Economics; Market Competition

The Medici family gained political control over the city of Florence in the later Middle Ages through __________.

Possible Answers:

a series of military victories thanks to the family's personal army

religious influence from a significant number of family members becoming priests

personally holding great tracts of land and resources in the Italian countryside

their role as advisors to a long line of Holy Roman Emperors

their wealth and influence from the establishment of the most powerful bank in the Italian peninsula

Correct answer:

their wealth and influence from the establishment of the most powerful bank in the Italian peninsula

Explanation:

In 1394, Giovanni de Medici founded the Medici Bank in Florence, which over the next century became the most powerful and influential bank in all of Europe. Through this influence, the Medici family slowly gained political power over the city of Florence, which was asserting itself as the most powerful Italian city-state. The Medici family would become hereditary Dukes of Florence, produce four popes, and have two women become queen regents of France.

Example Question #5 : Commerce; Economics; Market Competition

"By preferring the support of domestic to that of foreign industry, he intends only his own security; and by directing that industry in such a manner as its produce may be of the greatest value, he intends only his own gain, and he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention. Nor is it always the worse for the society that it was no part of it. By pursuing his own interest he frequently promotes that of the society more effectually than when he really intends to promote it. I have never known much good done by those who affected to trade for the public good. It is an affectation, indeed, not very common among merchants, and very few words need be employed in dissuading them from it."

In the preceding excerpt adapted from Adam Smith's The Wealth of Nations (1776), Smith presents which of the following arguments?

Possible Answers:

There is no need for the regulation of an economy due to the public-mindedness of businesspeople.

The government should favor domestic industry over foreign industry in order to promote social welfare.

The "invisible hand" of God directs all the affairs of human beings.

People that say that they engage in business for the public good are often very effective at accomplishing what they set out to do.

By engaging in free and competitive trade, businesspeople often end up producing a great deal of value for society at large despite having only their own interests in mind.

Correct answer:

By engaging in free and competitive trade, businesspeople often end up producing a great deal of value for society at large despite having only their own interests in mind.

Explanation:

In perhaps the most famous passage from Adam Smith's magnum opus, The Wealth of Nations, Smith lays out his belief that the incentives faced by those engaging in free and competitive business result in often pure self-interest being made to work for wider public interests. Smith wrote at a time when it was common for  absolutist monarchs to manage large empires with millions of inhabitants for their own interests all the while cloaking their actions in the language of serving the greater good of the nation. Smith was influential in launching the free trade movement, which argued that society would prosper much more if businesspeople were allowed to trade freely rather than having monarchs directing economic affairs for their own personal gain.

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