Ap22 FRQ Microeconomics Set 1 1 PDF

2022
AP Microeconomics
®
Free-Response Questions
Set 1
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AP® Microeconomics 2022 Free-Response Questions
MICROECONOMICS
SECTI ON II
Total Time-1 hour
Reading Period-10 minutes
Writing Period-SO minutes
3 Questions
Directions: You are advised to spend the first 10 minutes reading all of the questions and planning your answers.
You will then have 50 minutes to answer all three of the following questions. You may begin writing your responses
before the reading period is over. 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. 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. If the question prompts you to "Calculate," you must show how you arrived at
your final answer. Use a pen with black or dark blue ink.
You may plan your answers in this orange booklet, but no credit will be given for anything written in this booklet.
You will only earn credit for what you write in the separate Free Response booklet.
© 2022 College Board.

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2 GO ON TO THE NEXT PAGE.

1. A firm has a patent on a new carbon-capture technology, making it the only producer of that device. The firm is
currently earning a positive economic profit and is producing the profit-maximizing level of output.
(a) Draw a correctly labeled graph for the firm and show each of the following.
(i) The quantity of carbon-capture devices produced by the firm, labeled QM
(ii) The price charged by the firm, labeled P M
(iii) The area representing consumer surplus, shaded completely
(b) The government is considering different options to regulate the firm.
(i) Suppose the government is considering taxing the firm. Could using a per-unit tax change the firm's
output to the socially optimal quantity? Explain.
(ii) Instead, suppose the government imposes a price ceiling so that the firm produces the socially
optimal quantity. On your graph in part (a), label the quantity and price after the price ceiling is
imposed as Qc and Pc.
(iii) At the price and the quantity identified in part (b)(ii), is the firm earning positive economic profit?
Explain.
(c) Assume the government decides not to regulate the firm and instead the firm produces the quantity of output
that maximizes total revenue.
(i) If the firm now increases its output by one unit, would marginal revenue be positive, negative, or
zero? Explain.
(ii) Starting at the total-revenue-maximizing quantity, if the firm reduces the price by 10%, would the
quantity demanded increase by less than 10%, by more than 10%, or by exactly 10% ?
__________________________________________________________
Begin your response to this question at the top of a new page in the separate Free Response booklet
and fill in the appropriate circle at the top of each page to indicate the question number.


2. Bueno is a firm that produces and sells guava, a type of fruit. The market for guava is perfectly competitive.
The marginal private benefit (MPB), marginal private cost (MPC), marginal social benefit (MSB), and marginal
social cost (MSC) curves are illustrated in the graph provided.
(a) Identify the kind of market failure represented by this graph.

(b) Using numbers from the graph, identify the marginal external benefit.
(c) Assume the guava market is in short-run equilibrium and Bueno hires workers in a perfectly competitive
labor market at a wage of $20 per hour. The marginal product of the last worker hired was 6 units of guava per
hour.
(i) Calculate the change in Bueno's profit per hour from the last worker hired. Show your work.
(ii) Suppose that the government decides to provide a per-unit subsidy to consumers who buy guava.
How would the per-unit subsidy affect Bueno's marginal revenue product curve? Explain.
(d) Instead of hiring workers in a perfectly competitive labor market, assume Bueno hires workers in a
monopsony labor market. Will the number of workers hired increase, decrease, or stay the same? Explain.
__________________________________________________________


3. In the local market for Good X, there are four individual buyers: Emily, Wu, Omar, and Fernanda. The
quantities that each individual buyer would be willing and able to purchase at different prices are included in
the table provided.
Quantity of Good X
Price Emily Wu Omar Fernanda
$1 5 4 4 3
$2 4 3 4 3
$3 4 3 3 2
$4 3 2 3 2
$5 3 2 2 1
$6 2 1 2 1
$7 2 1 1 0
$8 1 0 1 0
(a) The local market for Good X has a perfectly elastic supply. Draw a correctly labeled graph for the local
market for Good X with a market equilibrium price of $5. Label the equilibrium price as $5, and label the
equilibrium quantity for the market with a specific value based on the data provided in the table.
(b) Assume the cost of production increases, which causes the price of Good X to increase from $5 to $7.
(i) Calculate the price elasticity of demand for Good X as the price increases from $5 to $7. Show your
work.
(ii) Identify whether the demand for Good X is elastic, inelastic, or unit elastic in that range of prices.
(c) Could Emily’s marginal benefit for the second unit of Good X equal $4.50 ? Explain.
__________________________________________________________


STOP
END OF EXAM


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2022

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2 GO ON TO THE NEXT PAGE.

© 2022 College Board.

3 GO ON TO THE NEXT PAGE.

(a) Identify the kind of market failure represented by this graph.

© 2022 College Board.

4 GO ON TO THE NEXT PAGE.

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5 GO ON TO THE NEXT PAGE.

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