Answers to AP Microeconomics Practice Multiple Choice Questions

1. A

2. B

3. D

4. D

5. E

6. C

7. D

8. C

9. C

10. A

11. A

12. E

13. B

14. C

15. E

16. E

17. B

18. B

19. A

20. B

21. C

22. D

23. C

24. B

25. E

26. C

27. C

28. A

29. B

30. B

31. D

32. A

33. C

34. D

35. C

36. B

37. C

38. E

39. C

40. D

41. A

42. C

43. A

44. B

45. B

46. D

47. B

48. A

49. B

50. C

51. B

52. A

53. C

54. D

55. D

56. D

57. C

58. B

59. C

60. B

Don’t forget to write down a separate sheet of paper your name, and your score correct out of 60.  :)

Answers to AP Open Response Review

Answers to AP Open Response Review

Answer to #1: The John Lamb Company Question

Answers to AP Open Response

Answers to AP Open Response

Answer to #3: Company XYZ Question

Answers to AP Open Response

Answers to AP Open Response

Answer to #3: John Jones T-Shirt Question

Answers to AP Open Response Problems on Monopoly

Answer to AP Problem on the back of Thursday’s Do Now:

This question was worth 5 points.

a. 2 pts: 1 point for identifying Q1 and P5 as the profit-maximizing quantity and price, 1 point for identifying line segment AC as the segment of the demand curve that is elastic.

b. 1 point: for identifying the allocatively efficient level of output at Q3

c. 2 points: 1 point for identifying a per unit subsidy to lead the monopolist to produce the allocatively efficient level of output, 1 point for the explanation that by imposing a per unit subsidy, MC will shift down, so the new MR = MC will be at a higher level of output closer to Q3.

Answer to Question #2 on yesterday’s homework packet (GCR Company):

This question was worth 12 points.

a. 4 points: 1 point is earned for correctly labeled axes and an MR curve below a downward sloping demand curve, 1 point is earned for showing profit-maximizing quantity (Q) where MR = MC, 1 point is earned for identifying price (P) on the demand curve above Q, 1 point is earned for showing that P > ATC at Q

b. 3 points: 1 point is earned for stating that the profit-maximizing quantity Q and price P will not change, 1 point is earned for the explanation that the lump sum tax will not affect MC, and 1 point is earned for concluding that profits will decrease.

c. 3 points: 1 point is earned for stating that quantity Q will increase and price P will decrease, 1 point is earned for explaining that the MC curve shifts down, and 1 point is earned for concluding that profits will increase.

d. 2 points: 1 point is earned for concluding that GCR’s profits will fall in the long run and 1 point is earned for stating that new firms will exit the market

If You Think Only Poor People Need Welfare, Wait Till You See What Really Rich Folks Do With It

http://www.upworthy.com/if-you-think-only-poor-people-need-welfare-wait-till-you-see-what-really-rich-folks-do-with-it

This video is a really interesting look at the question of welfare vs. entitlement in the United States. It invites you to rethink the idea of a guaranteed minimum income in the United States, and consider a new social contract for America’s citizenry.

PS It really made think, especially right around 10:40. I hope you check it out.

Answers to 2001 #1

Answers to practice problem 2001 #1 (on back of study review guide):

a. Draw a firm graph with a horizontal demand curve (D=P=MR=AR) and a Nike swoosh MC curve.  Find the level of output (Q) where the two curves meet (MR=MC).  Draw an ATC curve below the price, and shade the area of profit where P>ATC at Q.

b.Draw a market graph in equilibrium.  Carry across the price to draw the firm graph (same as in part [a]).  Then, given the existence of short run profits, show that new firms have an incentive to enter the market.  The supply curve will shift to the right, pushing the price in the market down and quantity in the market up.  The price will fall until exactly P=ATC in the firm graph, illustrating that the firm is now in long run equilibrium.  In the firm graph, the price has dropped to the new market price, and as a result, the quantity in the firm graph has decreased (where the new P = MC).

c.

i. Given the decrease in price, MR also decreases.  (MR = P, so if P decreases, MR decreases.)

ii. Given the decrease in price, the new price will meet the MC at a lower level of output.  Output decreases.

iii. Given the new lower level of MC, TC decreases in the short run. (We’re used to seeing this the other way around, but the same holds true backwards.)

iv. Given that the price and quantity have both fallen, the total revenue has also decreased in the short run (TR = P*Q, so if both P and Q decrease, TR must also decrease).

Happy studying!

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