the 2012 ap microeconomics exams dave anderson centre college chief reader

The 2012AP Microeconomics Exams

Dave AndersonCentre CollegeChief Reader

Confidential and Proprietary –Not for Distribution

Agenda

• Exam Developers • Scores• Areas of Strength• Areas of Weakness• Discussion

Microeconomics

Committee ChairPamela M. Schmitt, United States Naval AcademyMichael A. Brody, Menlo School

Committee MembersLuis F. Fernandez, Oberlin CollegeMargaret Ray, Mary Washington CollegeDee Mecham, The Bishop’s SchoolSandra K. Wright, Adlai E. Stevenson High School

College Board AdvisorMary Kohelis, Brooke High School

Chief ReaderDavid Anderson, Centre College

ETS Assessment SpecialistsFekru DebebeHwanwei Zhao

Exams

Microeconomics59,000 Operational

Exams3,300 Alternate Exams

Mean / Standard Deviation / Max

1. Monopoly 4.66 2.8310

2. Consumer Choice Theory 2.461.64 6

3. Supply and Demand 1.59 1.29 5

Scores

20125 14.8%4 28.3% 3 21.8%2 16.3%1 18.8%

Scores

20125 14.8%4 28.3% 3 21.8%2 16.3%1 18.8%

201114.6%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 ErrorsAP Microeconomics

2012

Overview of Trouble Spots9. Optimal Consumption

Rule

7. Effect of Subsidy on Quantity Produced

6. Effect of Lump-Sum Subsidy on Deadweight 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 bagels and toy cars? Explain your answer 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 on bagels and toy cars? Explain your answer using marginal analysis.

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 on bagels and toy cars? Explain your answer using marginal analysis.

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 on bagels and toy cars? Explain your answer using marginal analysis.

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

$1

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 bagels and toy cars? Explain your answer using marginal analysis.

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

$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 on bagels and toy cars? Explain your answer using marginal analysis.

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

$3

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 bagels and toy cars? Explain your answer using marginal analysis.

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

$4

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 bagels and toy cars? Explain your answer using marginal analysis.

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

$6

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 bagels and toy cars? Explain your answer using marginal analysis.

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

$8

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 bagels and toy cars? Explain your answer using marginal analysis.

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

$10

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 bagels and toy cars? Explain your answer using marginal analysis.

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

$11

Or find whereMUBagels/$ = 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

32% answered correctly

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.

(25% answered correctly)

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)

Answer: Steverail’s quantity will increase because the MC curve will shift downward and intersect MR at a larger quantity.

(25% answered correctly)

6. Micro 1 (d)

Question: Assume that a lump-sum subsidy is provided to Steverail. In the short run, will deadweight loss increase, decrease, or not change? Explain.

Answer: Deadweight loss will not change because the profit-maximizing quantity does not change.

(20 percent answered correctly)

6. Micro 1 (d)

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. 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. You must show your work.

2

4

Domestic Price

2

4

Domestic Price

2 x 4 = 8

20% answered correctly

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.

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.

Domestic Price

5

10

½ base x height = ½ x 5 x 10 = 25

18% answered correctly

Domestic Price

5

10

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)

Answer: -0.4

(15% answered correctly)

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)

Answer: Total revenue would decrease because the demand is price elastic in that range of the demand curve.(Or because MR > 0).

(12% answered correctly)

Price

Quantity

Demand

0

Marginal Revenue

Inelastic range

Elastic Range

Price

Quantity0

Total Revenue

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?

A common wrong answer: $3

Domestic Price

$0 Tariff

1. Micro 3 (c)

Answer: $0

7% answered correctly