Learn Extracted exam questions AP Microeconomics 2014 Free Response
2014 Free Response
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The graph below shows the demand curve (D), marginal revenue curve (MR), marginal cost curve (MC), average total cost curve (ATC), and long-run average total cost curve (LRATC) for a monopolist.
[Graph with y-axis "PRICE" showing dashed gridlines at $10,$20, $30,$35, $40,$50, $60, and x-axis "QUANTITY" showing gridlines at 0, 2, 4, 5, 6, 8, 10, 12. A downward-sloping demand curve (D) runs from (0,$60) to (12, $0). A steeper downward-sloping marginal revenue curve (MR) runs from (0,$60) to about (6, $0). A horizontal line at$20 is labeled "MC = ATC = LRATC" and extends across the graph. Dashed reference lines connect the curves to the axis values at quantities 2, 4, 5, 6, 8, 10, and prices $10,$20, $30,$35, $40,$50, $60.]
Using the numbers given in the graph, identify each of the following for the profit-maximizing monopolist.
The quantity produced
Using the numbers given in the graph, identify each of the following for the profit-maximizing monopolist.
The price
Using the numbers given in the graph, identify each of the following for the profit-maximizing monopolist.
The allocatively efficient quantity
At the profit-maximizing quantity from part (a)(i), is the monopolist experiencing economies of scale? Explain.
Now assume that the monopolist produces 10 units. Using the numbers given in the graph, calculate each of the following. Show your work.
The monopolist's economic profit
Now assume that the monopolist produces 10 units. Using the numbers given in the graph, calculate each of the following. Show your work.
The consumer surplus
Now assume that the monopolist produces 10 units. Using the numbers given in the graph, calculate each of the following. Show your work.
The deadweight loss
At what quantity is demand unit elastic?
Suppose the monopolist perfectly price discriminates and chooses the quantity that maximizes profit. Determine the dollar value of each of the following.
The monopolist's profit
Suppose the monopolist perfectly price discriminates and chooses the quantity that maximizes profit. Determine the dollar value of each of the following.
The consumer surplus
Ray's Stable hires workers in a perfectly competitive factor market for unskilled labor.
Using correctly labeled side-by-side graphs for the labor market and Ray's Stable, show each of the following.
The equilibrium wage and quantity for unskilled labor, labeled $W_E$ and $Q_E$, respectively
Using correctly labeled side-by-side graphs for the labor market and Ray's Stable, show each of the following.
The wage paid by Ray's Stable and the quantity of unskilled labor hired, labeled $W_R$ and $Q_R$, respectively
Is the marginal factor cost of unskilled labor for Ray's Stable greater than, less than, or equal to $W_E$? Explain.
Now assume that the government imposes an effective minimum wage for unskilled labor.
Show the minimum wage on your graphs in part (a), labeled $W_{MIN}$.
Now assume that the government imposes an effective minimum wage for unskilled labor.
On the labor market graph in part (a), show the quantity of unskilled labor supplied in the labor market as a result of the minimum wage, labeled $Q_S$.
Now assume that the government imposes an effective minimum wage for unskilled labor.
As a result of the new minimum wage, will the marginal revenue product of the last worker hired by Ray's Stable increase, decrease, or stay the same?
Assume that gasoline is sold in a competitive market in which demand is relatively inelastic and supply is relatively elastic.
Draw a correctly labeled graph of the gasoline market. On your graph show the equilibrium price and quantity of gasoline, labeled $P_E$ and $Q_E$.
Suppose the government imposes a $2 per unit tax on the producers of gasoline. On your graph from part (a), show each of the following after the tax is imposed.
The price paid by buyers, labeled $P_B$
Suppose the government imposes a $2 per unit tax on the producers of gasoline. On your graph from part (a), show each of the following after the tax is imposed.
The after-tax price received by sellers, labeled $P_S$
Suppose the government imposes a $2 per unit tax on the producers of gasoline. On your graph from part (a), show each of the following after the tax is imposed.
The quantity, labeled $Q_T$
Using the labeling on your graph, explain how to calculate the total tax revenue collected by the government.
Will the tax burden fall entirely on buyers, entirely on sellers, more on buyers and less on sellers, more on sellers and less on buyers, or equally on buyers and sellers? Explain.