### 2012 AP Microeconomics Exam

```The 2012
AP Microeconomics Exams
Dave Anderson
Centre College
Agenda
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Confidential and Proprietary –
Not for Distribution
Microeconomics
Committee Chair
Pamela M. Schmitt, United States Naval Academy
Michael A. Brody, Menlo School
Committee Members
Luis F. Fernandez, Oberlin College
Margaret Ray, Mary Washington College
Dee Mecham, The Bishop’s School
Sandra K. Wright, Adlai E. Stevenson High School
Mary Kohelis, Brooke High School
David Anderson, Centre College
ETS Assessment Specialists
Fekru Debebe
Hwanwei Zhao
Exams
Microeconomics
59,000 Operational Exams
3,300 Alternate Exams
Mean / Standard Deviation / Max
1. Monopoly
2. Consumer Choice Theory
3. Supply and Demand
4.66
2.46
1.59
2.83
1.64
1.29
10
6
5
Scores
5
4
3
2
1
2012
14.8%
28.3%
21.8%
16.3%
18.8%
Scores
5
4
3
2
1
2012
14.8%
28.3%
21.8%
16.3%
18.8%
2011
14.6%
25.9%
21.6%
16.0%
21.9%
Students Did Great On
• Monopoly Graph
– Marginal Revenue and Demand Curves
– Profit Max Quantity where MR = MC
– Price on Demand Curve above Q*
• Finding Total Utility by Summing MU
• Identifying Domestic Production Level in
Situation with Imports and a Tariff
Most Common Errors
AP Microeconomics
2012
Overview of Trouble Spots
9. Optimal Consumption
Rule
7. Effect of Subsidy on
Quantity Produced
6. Effect of Lump-Sum
Loss
5. Tariff Revenue
4. Value of Consumer Surplus
3. Cross-price Elasticity
2. Effect of Price Increase on
Total Revenue
1. Surplus-maximizing Tariff
Special Mention: Labels!
9. Micro 2 (a)(ii)
Question: Theresa’s weekly income is \$11,
the price of a bagel is \$2, and the price of
a toy car is \$1. What quantity of bagels
and toy cars will maximize Theresa’s utility
if she spends her entire weekly income on
using marginal analysis.
Question: Theresa’s weekly income is \$11, the price of a bagel is \$2,
and the price of a toy car is \$1. What quantity of bagels and toy cars
will maximize Theresa’s utility if she spends her entire weekly income
Quantity of
Bagels
Marginal Utility
from Bagels
(utils)
Quantity of
Toy Cars
Marginal Utility
from Toy Cars
(utils)
1
8
1
10
2
7
2
8
3
6
3
6
4
5
4
4
5
4
5
3
6
3
6
2
Question: Theresa’s weekly income is \$11, the price of a bagel is \$2,
and the price of a toy car is \$1. What quantity of bagels and toy cars
will maximize Theresa’s utility if she spends her entire weekly income
Quantity
of Bagels
Marginal
Utility
from
Bagels
(utils)
MUBagels/\$
Quantity
of
Toy Cars
Marginal
Utility
from Toy
Cars
(utils)
MUCars/\$
1
8
4
1
10
10
2
7
3.5
2
8
8
3
6
3
3
6
6
4
5
2.5
4
4
4
5
4
2
5
3
3
6
3
1.5
6
2
2
Question: Theresa’s weekly income is \$11, the price of a bagel is \$2,
and the price of a toy car is \$1. What quantity of bagels and toy cars
will maximize Theresa’s utility if she spends her entire weekly income
\$1
Quantity
of Bagels
Marginal
Utility
from
Bagels
(utils)
MUBagels/\$
Quantity
of
Toy Cars
Marginal
Utility
from Toy
Cars
(utils)
MUCars/\$
1
8
4
1
10
10
2
7
3.5
2
8
8
3
6
3
3
6
6
4
5
2.5
4
4
4
5
4
2
5
3
3
6
3
1.5
6
2
2
Question: Theresa’s weekly income is \$11, the price of a bagel is \$2,
and the price of a toy car is \$1. What quantity of bagels and toy cars
will maximize Theresa’s utility if she spends her entire weekly income
\$2
Quantity
of Bagels
Marginal
Utility
from
Bagels
(utils)
MUBagels/\$
Quantity
of
Toy Cars
Marginal
Utility
from Toy
Cars
(utils)
MUCars/\$
1
8
4
1
10
10
2
7
3.5
2
8
8
3
6
3
3
6
6
4
5
2.5
4
4
4
5
4
2
5
3
3
6
3
1.5
6
2
2
Question: Theresa’s weekly income is \$11, the price of a bagel is \$2,
and the price of a toy car is \$1. What quantity of bagels and toy cars
will maximize Theresa’s utility if she spends her entire weekly income
\$3
Quantity
of Bagels
Marginal
Utility
from
Bagels
(utils)
MUBagels/\$
Quantity
of
Toy Cars
Marginal
Utility
from Toy
Cars
(utils)
MUCars/\$
1
8
4
1
10
10
2
7
3.5
2
8
8
3
6
3
3
6
6
4
5
2.5
4
4
4
5
4
2
5
3
3
6
3
1.5
6
2
2
Question: Theresa’s weekly income is \$11, the price of a bagel is \$2,
and the price of a toy car is \$1. What quantity of bagels and toy cars
will maximize Theresa’s utility if she spends her entire weekly income
\$4
Quantity
of Bagels
Marginal
Utility
from
Bagels
(utils)
MUBagels/\$
Quantity
of
Toy Cars
Marginal
Utility
from Toy
Cars
(utils)
MUCars/\$
1
8
4
1
10
10
2
7
3.5
2
8
8
3
6
3
3
6
6
4
5
2.5
4
4
4
5
4
2
5
3
3
6
3
1.5
6
2
2
Question: Theresa’s weekly income is \$11, the price of a bagel is \$2,
and the price of a toy car is \$1. What quantity of bagels and toy cars
will maximize Theresa’s utility if she spends her entire weekly income
\$6
Quantity
of Bagels
Marginal
Utility
from
Bagels
(utils)
MUBagels/\$
Quantity
of
Toy Cars
Marginal
Utility
from Toy
Cars
(utils)
MUCars/\$
1
8
4
1
10
10
2
7
3.5
2
8
8
3
6
3
3
6
6
4
5
2.5
4
4
4
5
4
2
5
3
3
6
3
1.5
6
2
2
Question: Theresa’s weekly income is \$11, the price of a bagel is \$2,
and the price of a toy car is \$1. What quantity of bagels and toy cars
will maximize Theresa’s utility if she spends her entire weekly income
\$8
Quantity
of Bagels
Marginal
Utility
from
Bagels
(utils)
MUBagels/\$
Quantity
of
Toy Cars
Marginal
Utility
from Toy
Cars
(utils)
MUCars/\$
1
8
4
1
10
10
2
7
3.5
2
8
8
3
6
3
3
6
6
4
5
2.5
4
4
4
5
4
2
5
3
3
6
3
1.5
6
2
2
Question: Theresa’s weekly income is \$11, the price of a bagel is \$2,
and the price of a toy car is \$1. What quantity of bagels and toy cars
will maximize Theresa’s utility if she spends her entire weekly income
\$10
Quantity
of Bagels
Marginal
Utility
from
Bagels
(utils)
MUBagels/\$
Quantity
of
Toy Cars
Marginal
Utility
from Toy
Cars
(utils)
MUCars/\$
1
8
4
1
10
10
2
7
3.5
2
8
8
3
6
3
3
6
6
4
5
2.5
4
4
4
5
4
2
5
3
3
6
3
1.5
6
2
2
Question: Theresa’s weekly income is \$11, the price of a bagel is \$2,
and the price of a toy car is \$1. What quantity of bagels and toy cars
will maximize Theresa’s utility if she spends her entire weekly income
\$11
Quantity
of Bagels
Marginal
Utility
from
Bagels
(utils)
MUBagels/\$
Quantity
of
Toy Cars
Marginal
Utility
from Toy
Cars
(utils)
MUCars/\$
1
8
4
1
10
10
2
7
3.5
2
8
8
3
6
3
3
6
6
4
5
2.5
4
4
4
5
4
2
5
3
3
6
3
1.5
6
2
2
Or find where
MUBagels/\$ = MUCars/\$
and all money is spent
Quantity
of Bagels
Marginal
Utility
from
Bagels
(utils)
MUBagels/\$
Quantity
of
Toy Cars
Marginal
Utility
from Toy
Cars
(utils)
MUCars/\$
1
8
4
1
10
10
2
7
3.5
2
8
8
3
6
3
3
6
6
4
5
2.5
4
4
4
5
4
2
5
3
3
6
3
1.5
6
2
2
MUBagels/\$ = MUCars/\$
and all money is spent
8. Micro 2 (b)
Question: Assume that the price of wheat,
an input for the production of bagels,
increases. Will Theresa’s demand for
bagels increase, decrease, or not change?
Explain.
8. Micro 2 (b)
Answer: Theresa’s demand for bagels will not
change because the increase in the price of
wheat will affect the supply of bagels, not the
demand.
7. Micro 1 (c)(i)
Question:
Assume a per-unit subsidy is provided to
Steverail. Will Steverail’s quantity increase,
decrease, or not change? Explain.
7. Micro 1 (c)(i)
because the MC curve will shift downward and
intersect MR at a larger quantity.
6. Micro 1 (d)
Question: Assume that a lump-sum subsidy
is provided to Steverail. In the short run,
or not change? Explain.
6. Micro 1 (d)
because the profit-maximizing quantity
does not change.
5. Micro 3 (b)(iii)
Question: Suppose that Loriland imposes a
per-unit tariff on sugar imports and the new
domestic price including the tariff is \$4.
Calculate the total tariff revenue collected by
the government. You must show your work.
Question: Suppose that Loriland imposes a per-unit tariff on
sugar imports and the new domestic price including the tariff
is \$4.
Calculate the total tariff revenue collected by the government.
Domestic Price
2
4
Question: Suppose that Loriland imposes a per-unit tariff on sugar imports
and the new domestic price including the tariff is \$4.
Calculate the total tariff revenue collected by the government.
Domestic Price
2
4
2x4=8
4. Micro 3 (b)(ii)
Question: Suppose that Loriland imposes a
per-unit tariff on sugar imports and the new
domestic price including the tariff is \$4.
Calculate the domestic consumer surplus for
Loriland. You must show your work.
5
Domestic Price
10
Question: Suppose that Loriland imposes a per-unit tariff on sugar imports and the
new domestic price including the tariff is \$4.
Calculate the domestic consumer surplus for Loriland. You must
5
Domestic Price
10
½ base x height = ½ x 5 x 10 = 25
3. Micro 2 (d)
Question: Suppose that when the price of toy
cars increases by 10 percent, Theresa buys 5
percent fewer toy cars and 4 percent less of a
different toy, blocks. Calculate the cross-price
elasticity of toy cars and blocks and indicate if
it is positive or negative.
3. Micro 2 (d)
Cross-price elasticity = %∆QBlocks / %∆Ptoys
= -0.04 / 0.10
= -0.4
3. Micro 2 (d)
2. Micro 1 (b)
Question: If Steverail raised its price above
Pm identified in part (a)(i), would total
revenue increase, decrease, or not
change? Explain.
Question: If Steverail raised its price above
Pm identified in part (a)(i), would total
revenue increase, decrease, or not
change? Explain.
2. Micro 1 (b)
because the demand is price elastic in that
range of the demand curve.
(Or because MR > 0).
Pric
e
Elastic Range
Inelastic range
Demand
0
Pric
e
Quantity
Marginal
Revenue
Total
Revenue
0
Quantity
1. Micro 3 (c)
Question: Given the world price of \$2, what
per-unit tariff maximizes the sum of
Loriland’s domestic consumer surplus and
producer surplus?
Domestic Price