AP® Microeconomics 2004 Free-Response Questions

147 Pages·2015·3.71 MB·English

AP® Microeconomics
2004 Free-Response Questions

The materials included in these files are intended for noncommercial use by
AP teachers for course and exam preparation; permission for any other use
must be sought from the Advanced Placement Program®. Teachers may
reproduce them, in whole or in part, in limited quantities, for face-to-face
teaching purposes but may not mass distribute the materials,
electronically or otherwise. This permission does not apply to any
third-party copyrights contained herein. These materials and any copies
made of them may not be resold, and the copyright notices
must be retained as they appear here.

The College Board is a not-for-profit membership association whose mission is to connect students to college success and opportunity.
Founded in 1900, the association is composed of more than 4,500 schools, colleges, universities, and other educational organizations. Each year, the
College Board serves over three million students and their parents, 23,000 high schools, and 3,500 colleges through major programs and services in
college admissions, guidance, assessment, financial aid, enrollment, and teaching and learning. Among its best-known programs are the SAT®, the
PSAT/NMSQT®, and the Advanced Placement Program® (AP®). The College Board is committed to the principles of
excellence and equity, and that commitment is embodied in all of its programs, services, activities, and concerns.

For further information, visit www.collegeboard.com

Copyright © 2004 College Entrance Examination Board. All rights reserved. College Board, Advanced Placement Program, AP, AP Central,
AP Vertical Teams, APCD, Pacesetter, Pre-AP, SAT, Student Search Service, and the acorn logo are registered trademarks of the
College Entrance Examination Board. PSAT/NMSQT is a registered trademark jointly owned by the
College Entrance Examination Board and the National Merit Scholarship Corporation.
Educational Testing Service and ETS are registered trademarks of Educational Testing Service.
Other products and services may be trademarks of their respective owners.

For the College Board’s online home for AP professionals, visit AP Central at apcentral.collegeboard.com.
2004 AP® MICROECONOMICS FREE-RESPONSE QUESTIONS

MICROECONOMICS
Section II
Planning time—10 minutes
Writing time—50 minutes

Directions: You have fifty minutes to answer all three of the following questions. It is suggested that you spend
approximately half your time on the first question and divide the remaining time equally between the next two
questions. In answering the questions, you should emphasize the line of reasoning that generated your results; it is
not enough to list the results of your analysis. Include correctly labeled diagrams, if useful or required, in explaining
your answers. A correctly labeled diagram must have all axes and curves clearly labeled and must show directional
changes.

1. The production of good X creates an externality. The following questions are based on the graph above, which
shows the marginal revenue, marginal social benefit, marginal private cost, and marginal social cost associated
with the production of good X.
(a) Is the externality positive or negative? Explain.
(b) Using labeling from the graph above, identify the socially optimum output. Explain how you determined
your answer.
(c) Suppose that good X is produced by a profit-maximizing monopoly. Answer each of the following.
(i) Using labeling from the graph above, identify the unregulated firm’s output. Explain how you
determined your answer.
(ii) To produce the socially optimum output, indicate whether the government should tax or subsidize the
firm.
(iii) Calculate the dollar value of the needed per-unit tax or subsidy.

QUESTION 1 CONTINUES ON PAGE 3.
Copyright © 2004 by College Entrance Examination Board. All rights reserved.
Visit apcentral.collegeboard.com (for AP professionals) and www.collegeboard.com/apstudents (for AP students and parents).

GO ON TO THE NEXT PAGE.
睿途教育 北美留学长线规划专家 2
www.oneplusone.cn
2004 AP® MICROECONOMICS FREE-RESPONSE QUESTIONS

(d) Suppose that good X is produced in a perfectly competitive industry. Answer each of the following.
(i) Using labeling from the graph on the previous page, identify equilibrium output in the absence of
regulation. Explain how you determined your answer.
(ii) To produce the socially optimum output, indicate whether the government should tax or subsidize the
firms in the industry.
(iii) Calculate the dollar value of the needed per-unit tax or subsidy.

2. The graph above shows the demand for oil by United States residents, the supply of oil by United States
producers, and the world price of oil. Use the labeling of the graph to answer the following questions.
(a) Identify the following before international trade occurs.
(i) Price of oil in the United States market
(ii) Quantity of oil produced in the United States
(b) Now assume that the United States begins to import oil at the world market price of P . Identify the quantity
w
imported by the United States.
(c) Identify the consumer surplus in the United States market for each of the following cases.
(i) Before international trade
(ii) After international trade
(d) Identify the producer surplus in the United States market for each of the following cases.
(i) Before international trade
(ii) After international trade
(e) Identify the net gain in total surplus from trade.
Copyright © 2004 by College Entrance Examination Board. All rights reserved.
Visit apcentral.collegeboard.com (for AP professionals) and www.collegeboard.com/apstudents (for AP students and parents).

GO ON TO THE NEXT PAGE.
睿途教育 北美留学长线规划专家 3
www.oneplusone.cn
微信一扫，一手掌握
2004 AP® MICROECONOMICS FREE-RESPONSE QUESTIONS

3. Assume that a profit-maximizing firm in a monopolistically competitive industry is in long-run equilibrium.
(a) Draw a correctly labeled graph that shows the profit-maximizing firm’s price and output.
(b) Assume that the city in which this industry operates eliminates the business license fee (a fixed cost) for all
firms in this industry. How does the elimination of the license fee affect each of the following for the
individual firm in the short run? Explain your answers.
(i) Output
(ii) Economic profits

END OF EXAMINATION

Copyright © 2004 by College Entrance Examination Board. All rights reserved.
Visit apcentral.collegeboard.com (for AP professionals) and www.collegeboard.com/apstudents (for AP students and parents).

睿途教育 北美留学长线规划专家 4
www.oneplusone.cn
AP® Microeconomics
2004 Scoring Guidelines

The materials included in these files are intended for noncommercial use by
AP teachers for course and exam preparation; permission for any other use
must be sought from the Advanced Placement Program®. Teachers may
reproduce them, in whole or in part, in limited quantities, for face-to-face
teaching purposes but may not mass distribute the materials,
electronically or otherwise. This permission does not apply to any
third-party copyrights contained herein. These materials and any copies
made of them may not be resold, and the copyright notices
must be retained as they appear here.

The College Board is a not-for-profit membership association whose mission is to connect students to college success and opportunity.
Founded in 1900, the association is composed of more than 4,500 schools, colleges, universities, and other educational organizations. Each year, the
College Board serves over three million students and their parents, 23,000 high schools, and 3,500 colleges through major programs and services in
college admissions, guidance, assessment, financial aid, enrollment, and teaching and learning. Among its best-known programs are the SAT®, the
PSAT/NMSQT®, and the Advanced Placement Program® (AP®). The College Board is committed to the principles of
excellence and equity, and that commitment is embodied in all of its programs, services, activities, and concerns.

For further information, visit www.collegeboard.com

Copyright © 2004 College Entrance Examination Board. All rights reserved. College Board, Advanced Placement Program, AP, AP Central,
AP Vertical Teams, APCD, Pacesetter, Pre-AP, SAT, Student Search Service, and the acorn logo are registered trademarks of the
College Entrance Examination Board. PSAT/NMSQT is a registered trademark of the
College Entrance Examination Board and National Merit Scholarship Corporation.
Educational Testing Service and ETS are registered trademarks of Educational Testing Service.
Other products and services may be trademarks of their respective owners.

For the College Board’s online home for AP professionals, visit AP Central at apcentral.collegeboard.com.
睿途教育 北美留学长线规划专家
www.oneplusone.cn
AP® MICROECONOMICS
2004 SCORING GUIDELINES

Question 1

Correct Answer:
(a) As shown on the graph, MSC>MPC indicates the existence of a negative externality.
(b) The socially optimal quantity is Q because MSB=MSC at this output level.
2
(c) The profit-maximizing quantity is Q because MR=MPC at this output level. To produce the socially
1
optimum quantity, the government should grant the monopolist a per-unit subsidy of $3.00.
(d) The equilibrium quantity for the perfectly competitive industry is Q because MPC =D(MSB) at this
3
output level. To produce the socially optimal quantity, the government should levy a per-unit tax of
$5.00 on firms in this industry.

Scoring Guidelines: 12 points (2+2+4+4)
(a) 2 points:
1 - Identifying negative externality
1 - (Marginal) social cost is higher than (marginal) private cost, (M)SC>(M)PC
**Contingent on negative externality as correct assertion

(b) 2 points:
1 - Identifying Q
2
1 - Marginal social benefit equals marginal social cost (D=MSC or P=MSC)

(c) 4 points:
(i) 1 - Identifying Q
1
1 - At Q marginal private cost equals marginal revenue (MPC=MR or MC=MR)
1,
(ii) 1 - Subsidize the firm
(iii) 1 - $3 per unit
**Contingent on subsidy as correct assertion in (c)(ii)

(d) 4 points:
(i) 1 - Identifying Q
3
1 - Marginal social benefit equals marginal private cost
D=MPC or MSB=MPC
(ii) 1 - Tax the industry
(iii) 1 - $5 per unit
** Contingent on tax as correct assertion in (d)(ii)
Copyright © 2004 by College Entrance Examination Board. All rights reserved.
Visit apcentral.collegeboard.com (for AP professionals) and www.collegeboard.com/apstudents (for AP students and parents).

2
睿途教育 北美留学长线规划专家
www.oneplusone.cn
AP® MICROECONOMICS
2004 SCORING GUIDELINES

Question 2

Correct Answer:
(a) As shown on the graph, P and Q were the price and quantity of oil before trade in the US market.
2 2
(b) The amount of oil imported into the US market after trade would be equal to Q -Q US production
3 1.
drops to Q but quantity demanded rises to Q .
1 3
(c) The triangle P KG represents consumer surplus before trade, while triangle P KH represents consumer
2 W
surplus after trade.
(d) The triangle P P G represents producer surplus before trade, while triangle P P J represents producer
1 2 1 W
surplus after trade.
(e) The triangle JGH shows the net gain in total surplus from trade.

Scoring Guidelines: 8 points (2+1+2+2+1)
(a) 2 points: (Pre-trade)
1 - Identifying P
2
1 - Identifying Q
2

(b) 1 point: (Imports) Identifying (Q - Q ) or (H-J)
3 1

(c) 2 points: (Consumer surpluses)
1 - Identifying P KG (before)
2
1 - Identifying P KH (after)
W

(d) 2 points: (Producer surpluses)
1 - Identifying P P G (before)
1 2
1 - Identifying P P J (after)
1 W

(e) 1 point: (Net gain in surplus) Identifying JGH
Copyright © 2004 by College Entrance Examination Board. All rights reserved.
Visit apcentral.collegeboard.com (for AP professionals) and www.collegeboard.com/apstudents (for AP students and parents).

3
睿途教育 北美留学长线规划专家
www.oneplusone.cn
AP® MICROECONOMICS
2004 SCORING GUIDELINES

Question 3

Correct Answer:
(a) The correct graph for a monopolistically competitive firm will show a downward-sloping D curve
with a downward-sloping MR curve below it. The firm’s price and output would be found at the
equality of MR and MC. In the long run, the ATC curve is tangent to the demand curve and equal to
price directly above the output level at which MR=MC.
(b) When the fixed cost decreases, MC is not affected so that the output and price remain constant.
Economic profit increases since the ATC falls.

Scoring Guidelines: 8 points (4+4)

(a) 4 points:
1 - Graph with a downward-sloping demand curve with correctly labeled axes
1 - Downward-sloping marginal revenue curve below the demand curve
1 - Q from MR = MC and P from Demand directly above Q
1 - Long-run equilibrium, AC (or ATC) tangent to Demand at Q
(b) 4 points:
1 - Individual firm’s output level does not change
1 – License fee is a fixed cost, thus it does not affect the firm’s marginal cost
1 - Economic profits increase
1 - Explanation

**Contingent on b(i)
If Q does not change in b(i), TC or ATC decrease is sufficient.
If Q changes in b(i), then “correct” explanation of how TR/TC or AR/ATC is affected
is necessary.
Copyright © 2004 by College Entrance Examination Board. All rights reserved.
Visit apcentral.collegeboard.com (for AP professionals) and www.collegeboard.com/apstudents (for AP students and parents).

4
睿途教育 北美留学长线规划专家
www.oneplusone.cn
AP® Microeconomics
2004 Free-Response Questions
Form B

The materials included in these files are intended for noncommercial use by
AP teachers for course and exam preparation; permission for any other use
must be sought from the Advanced Placement Program®. Teachers may
reproduce them, in whole or in part, in limited quantities, for face-to-face
teaching purposes but may not mass distribute the materials,
electronically or otherwise. This permission does not apply to any
third-party copyrights contained herein. These materials and any copies
made of them may not be resold, and the copyright notices
must be retained as they appear here.

The College Board is a not-for-profit membership association whose mission is to connect students to college success and opportunity.
Founded in 1900, the association is composed of more than 4,500 schools, colleges, universities, and other educational organizations. Each year, the
College Board serves over three million students and their parents, 23,000 high schools, and 3,500 colleges through major programs and services in
college admissions, guidance, assessment, financial aid, enrollment, and teaching and learning. Among its best-known programs are the SAT®, the
PSAT/NMSQT®, and the Advanced Placement Program® (AP®). The College Board is committed to the principles of
excellence and equity, and that commitment is embodied in all of its programs, services, activities, and concerns.

For further information, visit www.collegeboard.com

Copyright © 2004 College Entrance Examination Board. All rights reserved. College Board, Advanced Placement Program, AP, AP Central,
AP Vertical Teams, APCD, Pacesetter, Pre-AP, SAT, Student Search Service, and the acorn logo are registered trademarks of the
College Entrance Examination Board. PSAT/NMSQT is a registered trademark jointly owned by the
College Entrance Examination Board and the National Merit Scholarship Corporation.
Educational Testing Service and ETS are registered trademarks of Educational Testing Service.
Other products and services may be trademarks of their respective owners.

For the College Board’s online home for AP professionals, visit AP Central at apcentral.collegeboard.com.
睿途教育 北美留学长线规划专家
www.oneplusone.cn