AP Microeconomics “Free” Response Questions Production-possibilities Curve 1999 #2 Production-possibilities Curve (!e"t "nd clot! comp"r"tive "dv"nt"$e% 2&&' #' Production-possibilities Curve ("bsolutecomp"r"tive "dv"nt"$e terms o) tr"de% 2&&* #' Production-possibilities Curve ("bsolutecomp"r"tive "dv"nt"$e terms o) tr"de% +uppl, em"nd Price Floor Price Ceilin$ .l"sticit, 199& #2 1990 #2 199 #2 199' #2 199* #1 2&&& #' 2&&4 #2
/nel"stic Portion o) t!e em"nd Curve +uppl,em"nd (circus price ceilin$% +uppl,em"nd (t" on ci$"rettes el"sticit, o) dem"nd% +uppl,em"nd (co))eecre"m suppl,dem"nd in product)"ctors m"r3ets% +uppl,em"nd (el"sticit, price )loor "lloc"tive e))icienc,% +uppl,em"nd (t"ri))s el"sticit,% +uppl,em"nd (t"es consumerproducer surplus de"dei$!t loss%
5tilit, 2&&2 #' 5tilit, ("pplesor"n$es tot"l utilit, m"r$in"l utilit,% 2&&* #2 5tilit, (utilit, m"r$in"l utilit, per)ectl, inel"stic t" on product% Per)ect Competition 199& #1 1990 #' 2&&1 #1 19*9 #1 1999 #1 199' #1 2&&1 #1 1992 #2 1991 #2 2&&4 #1 2&&0 #2
Per)ect Competition (incre"se in dem"nd% Per)ect Competition (MC ( MC A6C A6C A7 A7C% Per)ect Competition ($r"p!s A7 A7C s!ut don 8R% Per)ect Competition (price ceilin$% Per)ect Competition (price ceilin$% Per)ect Competition (decre"se in ener$, costs MC A7 A7C entr,eit% Per)ect Competition ($r"p!s A7 A7C s!ut don 8R% Per)ect Competition (price ceilin$ incre"se in !oles"le price% Per)ect Competition (c!"n$e in m"r$in"l "nd "ver"$e costs% Per)ect Competition (dem"nd decre"se s!ut don rule lon$ run% Per)ect Competition (costs)ied costs m"r$in"l cost pro)it m"imi:"tion const"nt costs per-unit t"% 2&&* #1 Per)ect Competition ($r"p!s lump-sum subsid, pro)it lon$ run vs; s!ort s!ort run% Monopol, 19*9 #2 1992 #1 199' #' 199 #' 199* #'
Monopol, Monopol, Monopol, Monopol, Monopol,
(b"sic economic e))icienc,% (sin$le "irline )ied costs $o up% up% (b"sic b"rriers to entr,% (el"sticit, o) dem"nd price discrimin"tion%
199< #2 Monopol, (norm"l pro)its economic e))icienc,% 2&&' #2 Monopol, (b"sic consumer surplus de"dei$!t loss% 2&&0 #1 Monopol, ($r"p! it! m"n, =uestions rel"tin$ to $r"p! "ccountin$ pro)its "lloc"tive e))icienc,% 2&&< #1 Monopol, ($r"p! per-unit t" per-unit subsid,% Per)ect Competition A> Monopol, (Combined% 1990 1999 2&&& 2&&*
#1 Per)ect CompetitionMonopol, (dict"tor to PC economic e))icienc,% #' Per)ect CompetitionMonopol, ($r"p!s ? MR does not ? MR% #1 Per)ect CompetitionMonopol, (el"sticit, consumer surplus "lloc"tive e))icienc,% #' Per)ect CompetitionMonopol, (price celin$ soci"l e))icienc, n"tur"l monopol,%
Monopolistic Competition 2&& #' Monopolistic Competition @r"p! li$opol, 2&&< #' @"me 6!eor, (Ro"d", "nd R"n3in% F"ctors M"r3et 199< #1 2&&1 #' 2&&4 #' 199* #2 2&&' #' 1&&& #2 1991 #1 2&&2 #1 2&&<#2
MRP ? MFC (Bones 6-s!irts% MRP ? MFC (+p"r3le C"r "s! "$es% MRP ? MFC (MP MRP MFC !o m"n, or3ersD% MRP ? MFC (dim; M"r$in"l returns MPAP curve MP vs; A7C% MRP ? MFC (de)inition o) MRP side-b,-side $r"p! o) PC o) PC l"bor industr,individu"l m"r3et incre"se in tec!productivit,% MRP ? MFC ("$es p;c; pro)it% Per)ect Competition in t!e )"ctors m"r3et Per)ect CompetitionMonopol, (monopol,p;c; PC )"ctors m"r3et% MRP ? MFC (t"ble $r"p! MRP ? MFC pro)it-m"; incre"sed productivit, MRP ? MFC%
M+E ? M+C 2&&1 2&&2 199< 199 2&&'
#2 #2 #' #1 #1
M+C ? M+E (etern"lities% M+C ? M+E (bot! M+C "nd M+E curves s!i)t% M"r$in"l "n"l,sis (MC M+E M+C MPP% Per)ect Competition ("$es MRP ? MFC Price )loor% Per)ect Competition (smo3e "l"rm s!ort runlon$ run pro)its positive etern"lities in t!e m"r3et% 2&& #1 .tern"lit, "nd Monopol, @r"p! 2&&0 #' >e$"tive etern"lit, positive etern"lit, per-unit subsid, $r"p!in$ 6"ri))s "nd orld 6r"de
2&& #2 omesticorld @r"p! t"ri))s
AP M"croeconomics “Free” Response Questions
Production-possibilities Curve 1999 #2 Production-possibilities Curve (!e"t "nd clot! comp"r"tive "dv"nt"$e% 2&&' #' Production-possibilities Curve ("bsolutecomp"r"tive "dv"nt"$e terms o) tr"de% 2&&* #' Production-possibilities Curve ("bsolutecomp"r"tive "dv"nt"$e terms o) tr"de% Circul"r Flo "nd @P 199< #2 Circul"r Flo (circul"r )loA)lo o) ependitures)lo o) e"rnin$s% 1999 #2 @P ()lo o) ependitures)lo o) e"rnin$s !"t is included in @P% 2&&< #' @P (!"t is "nd is not included% Monet"r, Polic, 199' #2 Reserve Re=uirement (6-"ccount% 1990 #' Reserve Re=uirement (M+ simple mone, multiplier limit"tions% 2&&1 #' Reserve Re=uirement (M1 M2 m"imum lo"ns limit"tions% 2&& #' F. bu,s bonds 6 "ccount incre"se in t!e mone, suppl, A$$re$"te +uppl, "nd A$$re$"te em"nd (Monet"r,Fisc"l8R% 19*9 199& 199' 1990 199* 199*
#1 #1 #1 #1 #2 #1
2&&& #1 2&&& #' 2&&1 #1 2&&2 #1 2&& #1 2&&4 #1
A+A (econom, less t!"n )ull emplo,ment )isc"lmonet"r, 8R% A+A (econom, is ide"l )isc"l monet"r, 8R% A+A (econom, is per)ect )isc"l messes it up monet"r, corrects it% A+A (!i$! in)l"tion )isc"l monet"r, limit"tions o) t!ese policies% +ell Eonds (interest r"tes investment A P8 Q% A+A (econom, is per)ect )isc"l polic, messes it up monet"r, polic, debt de)icit suppl,-side t" polic, 8R A+ PP curve% A+A (deep recession monet"r, )isc"l / lon$ run A+% Mone, M"r3et @r"p! (interest r"tes components o) A AA+ P8 Q% A+A (less t!"n )ull emplo,ment )isc"l mone, dem"nd interest r"tes corpor"te t"es AA+ P8 Q% A+A (econom, !"s !i$! unemplo,ment )isc"l monet"r, interest r"tes% A+A st"te o) econom, F. )leible "$es "nd prices A+A (econom, is per)ect $oes into recession F. policies re"l interest
/ntern"tion"l M"r3et A> .c!"n$e R"tes 1990 #2 .c!"n$e R"tes (en Fr"nc M"r3 G H M intern"tion"l v"lue o) G% 199* #' /ntern"tion"l v"lue o) t!e currenc, (c!"n$e in l"bor productivit,% 2&&& #2 .c!"n$e R"tes (dem"nd )or Frenc! $oods incre"se in interest r"te intern"tion"l v"lue o) G% 2&&1 #2 .c!"n$e R"tes (intern"tion"l v"lue o) G H M% 2&&2 #' /ntern"tion"l 7"lue o) G (interest r"tes H M%
2&&' #2 /n)l"tion (e))ects on )ied interest "ccount )ied interest lo"n !o )isc"l "nd monet"r, polic, c"n correct in)l"tion "))ect o) in)l"tion on nomin"l r"tes "))ect o) in)l"tion on intern"tion"l v"lue o) G% 2&& #2 8o"n"ble )unds "nd ec!"n$e m"r3et 2&&4 #2 8o"n"ble )unds de)icit spendin$ investment intern"tion"l v"lue o) G 2&&* #2 E"l"nce o) P",ments current vs; c"pit"l "ccount currenc, ec!"n$e m"r3et%
A$$re$"te +uppl, "nd A$$re$"te em"nd (Monet"r,Fisc"l8R/ntern"tion"l% 1992 #2 199 #' 199< #' 1999 #1
A+A (incre"se in A monet"r, )isc"l intern"tion"l v"lue o) G H M% /ncre"se Productivit, (A+ P Q H intern"tion"l v"lue o) G% A+A (recession )isc"l monet"r, H M intern"tion"l v"lue o) G% A+A (incre"se in rel"tive interest r"tes v"lue o) G H M / A A+ )isc"l monet"r,% 2&&' #1 A+A (severe recession )isc"l monet"r, v"lue o) G H M% 2&&0 #1 A+A (current st"te ener$, costs rise A+A intern"tion"l v"lue o) G% 2&&< #1 A+A (mone, m"r3et dem"nd A+A intern"tion"l v"lue o) G% A$$re$"te +uppl, +!i)t 1991 #1 A+A (suppl, s!oc3 )isc"l monet"r, H M% 199 #1 A+A (st"$)l"tion )isc"l monet"r,% 199 #2 8on$ Run @rot! (s!ort-term interest r"tes "$$re$"te ependitures @P% 1999 #' A+A (incre"se in investment A C"pit"l +toc3 8R A+ Q PP curve% 2&&2 #2 A+8on$-run e))ect (decre"se in l"bor p"rticip"tion incre"se in $ov; de)icit decre"se in =u"ntit, o) inputs re=uired to produce incre"se in =u"lit, o) educ"tion incre"se in s"vin$s r"te% i))icult R Misc; Questions 199< #1 /nterest r"teMone, dem"nd sensitivit, 199' #' >omin"l "$es Rise F"ster t!"n 8"bor Productivit, (!"t !"ppens to t!e $ener"l price level H intern"tion"l v"lue o) t!e G% 2&&4 #' P!illips curve (s!ort run "nd lon$ run% 2&&0 #2 8o"n"ble )unds m"r3et mone, m"r3et re"l interest nomin"l interest 2&&0 #' 5nemplo,ment n"tur"l r"te o) unemplo,ment p"rt-time emplo,ees "nd unemplo,ment r"te P!illips curve; 2&&< #2 Feder"l )unds r"te multiplier nomin"l interest r"te re"l interest r"te 2&&* #1 P!illips Curve recession spendin$ multiplier t" multiplier lo"n"ble lo"n"ble )unds
