AP Microeconomics Practice Exam

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AP Microeconomics Exam
®

SECTION I: Multiple Choice 2014

DO NOT OPEN THIS BOOKLET UNTIL YOU ARE TOLD TO DO SO.
Instructions
At a Glance
Section I of this exam contains 60 multiple-choice questions. Fill in only the circles for
Total Time numbers 1 through 60 on your answer sheet.
1 hour, 10 minutes
Number of Questions Indicate all of your answers to the multiple-choice questions on the answer sheet. No
60 credit will be given for anything written in this exam booklet, but you may use the booklet
Percent of Total Score for notes or scratch work. After you have decided which of the suggested answers is best,
66.67% completely fill in the corresponding circle on the answer sheet. Give only one answer to
Writing Instrument each question. If you change an answer, be sure that the previous mark is erased
Pencil required completely. Here is a sample question and answer.

Use your time effectively, working as quickly as you can without losing accuracy. Do not
spend too much time on any one question. Go on to other questions and come back to
the ones you have not answered if you have time. It is not expected that everyone will
know the answers to all of the multiple-choice questions.
Your total score on the multiple-choice section is based only on the number of questions
answered correctly. Points are not deducted for incorrect answers or unanswered
questions.

Form I
Form Code 4JBP6-S

34
 MICROECONOMICS
Section I
Time—70 minutes
60 Questions

Directions: Each of the questions or incomplete statements below is followed by five suggested answers or
completions. Select the one that is best in each case and then fill in the corresponding circle on the answer sheet.

1. Improvements in technology for producing all 4. Assume that ice cream is a normal good. If the
goods must result in price of ice cream decreases, the substitution
effect and the income effect will lead to which of
(A) an inward shift in the production possibilities
the following changes in ice cream consumption?
curve
(B) an outward shift in the production possibilities Substitution Effect Income Effect
curve
(A) Increase Decrease
(C) a flatter production possibilities curve
(B) Increase Increase
(D) a steeper production possibilities curve
(C) Increase No change
(E) greater unemployment of labor
(D) Decrease Increase
(E) Decrease No change
2. The quantity of peanuts supplied increased from
40 tons per week to 60 tons per week when the
5. Short-run marginal costs eventually increase
price of peanuts increased from $4 per ton to
because of the effects of
$5 per ton. The price elasticity of supply for
peanuts over this price range is (A) increasing marginal product
(B) diminishing marginal product
(A) elastic
(C) diseconomies of scale
(B) inelastic
(D) economies of scale
(C) unit elastic
(E) increasing fixed costs
(D) perfectly elastic
(E) perfectly inelastic
6. If a government eliminated an effective price floor
in a market, all of the following would occur
3. Which of the following best describes
EXCEPT:
the law of demand?
(A) The surplus would be eliminated.
(A) The price of a good increases when
(B) The price would decrease.
the demand for the good increases.
(C) The quantity supplied would decrease.
(B) The price of a good decreases when
(D) The quantity demanded would increase.
the supply of the good decreases.
(E) The supply of the good would increase.
(C) When the price of a good increases,
its demand decreases.
(D) When the price of a good decreases,
its quantity demanded increases.
(E) Demand creates its own supply.

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7. Which of the following must be true if a firm is
experiencing economies of scale?
(A) All costs are explicit.
(B) Long-run average total cost decreases as the
firm’s output increases.
(C) Economic profits decrease as the firm’s
output increases.
(D) Long-run average total cost remains constant
as the firm’s output decreases.
(E) Proportionate increases in inputs result in
less-than-proportionate increases in output.

8. Compared to a perfectly competitive industry

with the same demand and cost curves, a
monopoly’s price and output will be which 11. For the firm shown in the graph above, the short-
of the following? run, profit-maximizing strategy would be to set
output at
Price Output
(A) Q1, price at P1, and suffer a loss
(A) The same Higher
(B) Q1, price at P3, and earn an economic profit
(B) Higher The same
(C) Higher Lower (C) Q1, price at P3, and earn only a normal profit
(D) Lower The same (D) Q2, price at P2, and earn an economic profit
(E) Lower Higher (E) Q2, price at P2, and earn only a normal profit

9. If the demand for a good is perfectly price inelastic 12. Which of the following will tend to make the
in the short run and the supply curve is upward demand for a product more elastic?
sloping, imposing a sales tax on the good will
(A) New firms which produce similar products
(A) leave the price paid by consumers unchanged enter the industry.
(B) decrease the after-tax revenues received by (B) A change in taste and preferences makes
suppliers the product more desirable.
(C) increase the after-tax revenues received by (C) The product is necessary for use with a
suppliers complement.
(D) not change the after-tax revenues received (D) Production of the product is protected by
by suppliers a patent.
(E) not change the total expenditures by (E) Production cost of the product decreases.
consumers on the good
13. In a perfectly competitive labor market, an
10. The characteristic of oligopolistic firms that makes increase in an effective minimum wage will
them different from all other types of firms is that result in
oligopolistic firms
(A) an increase in the supply of workers
(A) are regulated by a state agency or federal (B) a decrease in the supply of workers
agency (C) a decrease in the demand for workers
(B) consider each other’s decisions (D) more workers being hired
(C) advertise their products (E) fewer workers being hired
(D) produce differentiated products
(E) produce identical products

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14. Which of the following taxes contributes most 17. Which of the following is true in a capitalist
to decreasing inequality in the distribution of economy?
income?
(A) The factors of production are collectively
(A) Progressive income taxes owned.
(B) Sales taxes (B) The factors of production are distributed
(C) Proportional income taxes according to needs.
(D) Excise taxes (C) The prices of goods and services are usually
(E) Import tariffs on necessities determined by the government.
(D) The prices of goods and services are set so
15. A free-rider problem arises when a good is that an equitable distribution of private
property is achieved.
(A) nonrival
(E) Prices serve as incentives for factors of
(B) nondepletable
production to move to the markets
(C) nonexcludable
where they are most valued.
(D) produced in a competitive market
(E) produced in a monopolistic market
18. A city transit authority increases the price of sub-
way and bus tickets from $1.25 to $1.50. If the
demand for these tickets is price inelastic, the
number of people riding buses and subways and
the city’s revenues will most likely change in
which of the following ways?
Number of People
Riding City’s Revenues
(A) Increase Increase
(B) Decrease Increase
(C) Decrease Decrease
(D) Decrease Remain constant
(E) Remain constant Increase

16. According to the production possibilities curve

above, which of the following is true? 19. The difference between what consumers are
(A) The opportunity cost of producing another willing to pay for units of a good and the price
unit of good Y in terms of good X consumers actually pay for units of the good is
increases as more of good Y is produced. called
(B) The opportunity cost of producing another (A) marginal utility
unit of good Y in terms of good X (B) producer surplus
decreases as more of good Y is produced. (C) consumer surplus
(C) The opportunity cost of producing another (D) economic rent
unit of good X in terms of good Y (E) a positive externality
increases as more of good X is produced.
(D) The opportunity cost of producing another
unit of good X in terms of good Y
decreases as more of good X is produced.
(E) The opportunity cost of producing another unit
of either good remains constant as the
production of the other good increases.

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20. Which of the following is true if consuming one 23. At 100 units of output, a firm’s total cost is
unit of a good yields 100 utils and consuming the $10,000. If the firm’s total fixed cost is $4,000,
second unit of the good increases satisfaction by its average variable cost is equal to
20 utils?
(A) $140
(A) The marginal utility of the first unit is 20. (B) $100
(B) The marginal utility of the second unit is 80. (C) $60
(C) The marginal utility of the second unit is 120. (D) $40
(D) The total utility of consuming two units (E) $0
is 120.
(E) The total utility of consuming one unit is 24. Which of the following statements correctly
greater than the total utility of consuming identifies a difference between perfect
two units. competition and monopolistic competition?
(A) In perfect competition there are no barriers
21. If a new tax on capital increases a firm’s fixed
to entry, but there are strong barriers in
cost of production, which of the following will
monopolistic competition.
occur in the short run?
(B) In perfect competition there are many firms,
(A) Marginal cost will increase. but in monopolistic competition there are
(B) Average variable cost will increase. only a few firms.
(C) Average total cost will increase. (C) In perfect competition the firms all sell
(D) The profit-maximizing level of output will products that are exactly the same, but in
increase. monopolistic competition each firm sells
(E) The profit-maximizing level of output will a slightly differentiated product.
decrease. (D) In perfect competition firms maximize profit
by selling the quantity where marginal
revenue equals marginal cost, but in
monopolistic competition firms maximize
• The marginal product of labor equals profit by selling the quantity where
250 units of output. marginal revenue exceeds marginal cost.
• The marginal product of capital equals (E) In perfect competition there are few
750 units of output. consumers, but in monopolistic competition
• The price of labor is $50 per person. there are many consumers.
• The price of capital is $100 per unit.
25. The most profitable level of output for any firm
22. Given the information above, which of the
operating in the short run is the level of output at
following is true for a firm buying its labor and
which
capital inputs in a perfectly competitive market?
(A) marginal revenue exceeds marginal cost by
(A) The firm is producing its current level of
the highest amount
output with the least-cost combination of
(B) marginal revenue equals marginal cost
labor and capital.
(C) price exceeds average cost by the highest
(B) The firm is maximizing profits with its
amount
current combination of inputs.
(D) price equals average cost
(C) The firm’s level of output will remain the
(E) price equals marginal cost
same if 1 unit of capital is substituted for
2 units of labor.
(D) The firm’s input costs will decrease if 2 units
of labor are substituted for 1 unit of capital.
(E) The firm can reduce the cost of its current
level of output by laying off workers and
employing more capital.

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26. For an unregulated monopolist, the profit- Number of Workers Parts per Week
maximizing quantity will always be
0 0
(A) in the elastic region of the demand curve 1 100
(B) where marginal revenue equals price
2 190
(C) where price equals average total cost
(D) where price equals marginal cost 3 270
(E) where the marginal cost curve intersects the 4 340
demand curve 5 400
6 450
27. If a per-unit tax is imposed on a monopolist, how
will the monopolist’s marginal cost curve, output, 7 480
and the price paid by consumers be affected?
29. The table above describes the production function
Marginal Cost Output Price of an auto parts manufacturer. Assume that the
(A) Shift down Increase Decrease firm can hire as many workers as it wants at the
(B) Shift down Decrease Decrease market wage rate of $600 per week per worker
(C) No shift Decrease Decrease and sell as many auto parts as it wants at the price
(D) Shift up Decrease Increase of $10 per part. To maximize profits, the firm
(E) Shift up Increase Increase should hire
(A) 0 workers
28. The demand curve for labor for a monopolist that (B) 1 worker
faces a perfectly competitive factor market is (C) 3 workers
called the (D) 5 workers
(A) average product curve (E) 7 workers
(B) marginal product curve
(C) marginal revenue curve 30. Monopolistically competitive firms are considered
(D) marginal revenue product curve inefficient in allocating society’s resources for
(E) value of the average product curve which of the following reasons?
(A) In equilibrium, the marginal benefit exceeds
the price charged by the firms.
(B) In equilibrium, the marginal benefit exceeds
the marginal cost of production.
(C) In equilibrium, the marginal revenue of the
firm is not equal to its marginal cost.
(D) In long-run equilibrium, the firm is earning
economic profits.
(E) Firms exhibit significant market power and
therefore the number of firms in the industry
is strictly limited.

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31. As a factor of production, capital refers to the 34. For consumers, assume that fish sticks and tacos
are substitutes. Which of the following graphs
(A) money available to start a business
illustrates the effect on the taco market if the price
(B) stocks and bonds issued by businesses to
of fish sticks increases?
raise funds
(C) financial investment of businesses (A)
(D) currency in circulation and deposits in
financial institutions
(E) tools and machinery used to produce goods
and services

32. Which of the following will cause the supply

curve for shoes to shift to the right?
(A) An increase in the price of socks, assuming (B)
that shoes and socks are complements
(B) A decrease in the price of sandals, assuming
that shoes and sandals are substitutes
(C) An increase in the wages of shoe workers
(D) An increase in the number of firms producing
shoes
(E) A decrease in the income of consumers,
assuming that shoes are normal goods (C)

(D)

(E)
33. The diagram above depicts demand and supply
curves in a city’s rental housing market. If a price
ceiling of $1,000 is imposed on the market, which
of the following will occur?
(A) There will be a surplus of rental housing in
the city.
(B) The demand curve for housing will shift to
the right.
(C) The supply curve for housing will shift to the
right.
(D) The quantity of rental housing supplied will
decrease.
(E) The quantity of rental housing demanded will
increase.

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Questions 35-36 refer to the graph below for a 37. Which of the following MUST be true of the
representative firm in a perfectly competitive, long run?
constant-cost industry, which shows the firm’s (A) It is at least one year in duration.
marginal cost (MC), average total cost (ATC), and (B) All factors of production are variable.
average variable cost (AVC). (C) At least one factor of production is fixed.
(D) Marginal costs are constant.
(E) Average total costs are constant.

38. In order for a firm to engage in price discrimi-

nation, it must be
(A) able to separate consumers into different
groups based on demand elasticities
(B) producing in the inelastic portion of its
demand curve to raise its price and
increase total revenue
(C) a price taker
(D) experiencing economies of scale in the
relevant range of production
(E) experiencing constant marginal cost

39. Which of the following market structures results

35. In the short run, the firm will realize an economic in allocative efficiency?
loss but will continue to produce if the price is (A) Monopoly
(A) below P1 (B) Monopolistic competition
(B) between P1 and P2 (C) Perfect competition
(D) Natural monopoly
(C) below P2
(E) Oligopoly
(D) between P2 and P3
(E) between P3 and P4

36. Which of the following MUST be true in the

long run?
(A) The equilibrium price will be P2, since that is
where marginal cost equals minimum
average variable cost.
(B) The equilibrium price will be above P3, since
firms must make an economic profit to stay
in business.
(C) If the price is above P2, new firms will enter
the industry.
(D) If the price is above P3, new firms will enter
the industry.
(E) If the price is above P4, firms will exit the
industry.

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40. The following table shows the profits associated with the pricing strategies of two oligopolistic firms,
Agronomia and Farmingdale. Each firm has two possible strategies: to charge a low price or a high price.
The first entry in each cell shows the profits to Agronomia and the second the profits to Farmingdale.

Farmingdale charges Farmingdale charges

high price. low price.
Agronomia $150, $150 $50, $300
charges high price.
Agronomia $300, $50 $100, $100
charges low price.

If the two firms do not cooperate, as a result of the firms’ pricing decisions the profits of each firm will be which
of the following?
Agronomia’s Profit Farmingdale’s Profit

(A) $50 $100

(B) $150 $150
(C) $300 $50
(D) $100 $100
(E) $300 $300

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41. Which of the following will occur in a perfectly 43. Which of the following best defines a pure public
competitive labor market if Firm X’s demand for good?
labor decreases?
(A) A good that is provided free of charge to the
Equilibrium Employment public
Market Wage Rate by Firm X (B) A good that is provided by the government,
(A) Increase Increase whether or not a fee is charged
(B) No change No change (C) A good that is efficiently produced only by a
(C) No change Decrease monopoly
(D) Decrease Decrease (D) A good whose benefits can be enjoyed by
(E) Decrease No change many consumers at the same time and from
which consumers cannot be excluded
(E) A good that by law must be available to all
consumers without discrimination on the
basis of sex, race, or religion

44. A perfectly competitive manufacturing industry

pollutes public water in its production process,
leaving the water unsuitable for use by the
surrounding communities. At the market
equilibrium output level, which of the following is
true?
(A) Marginal private cost exceeds marginal
social cost.
(B) Marginal private cost exceeds marginal
private benefit.
(C) Marginal social cost exceeds marginal social
benefit.
42. The graph above shows the marginal revenue (D) The market equilibrium output is equal to the
product (MRP) and the market wage rate for socially efficient output.
a profit-maximizing firm. Which of the following (E) The market equilibrium output is less than
is true of the firm’s hiring of labor? the socially efficient output.
(A) It should hire 15 workers.
(B) It should hire between 15 and 40 workers. 45. Assume that under new environmental
(C) It should hire 40 workers. regulations, tire companies have to pay taxes
(D) It should hire between 40 and 90 workers. based on how much pollution is created when
(E) It should hire 90 workers. producing each tire. The price paid by consumers
and the quantity of tires sold will most likely
change in which of the following ways?
Price Quantity
(A) Increase Decrease
(B) Increase Increase
(C) Decrease Increase
(D) Decrease Decrease
(E) No change No change

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46. The market for goldfish is perfectly competitive. 49. An entrepreneur has earned enough total revenue
From year 1 to year 2, both the price and the to cover her accounting costs, but economic losses
quantity of goldfish sold increase. This is most are being incurred. What must be true?
likely caused by
(A) Her accounting costs are larger than her
(A) an increase in the supply economic costs.
(B) a decrease in the supply (B) Her accounting profits are less than her
(C) an increase in the demand implicit costs.
(D) a decrease in the demand (C) Her accounting profits are greater than
(E) a decrease in both the demand and the supply her economic costs.
(D) Her economic losses are less than her total
47. Using the same amount of time and resources, fixed costs.
Jack can assemble either 10 bikes or 5 computers, (E) Her implicit costs are less than her
whereas Sam can assemble either 5 bikes or 5 accounting costs.
computers. Based on the data, which of the
following statements is correct? 50. If nations specialize according to their
comparative advantage and engage in
(A) Sam has an absolute advantage in assembling
international trade with each other, each
bikes.
nation can
(B) Sam has an absolute advantage in assembling
computers. (A) produce outside its production possibilities
(C) Sam has a comparative advantage in curve
assembling bikes. (B) consume outside its production possibilities
(D) Jack has a comparative advantage in curve
assembling bikes. (C) shift its production possibilities curve to the
(E) Jack has a comparative advantage in right
assembling both bikes and computers. (D) become more self-sufficient
(E) produce more of all goods
48. Given an increase in the price of material K—
which is an input used to produce good X—and 51. When total physical product is at its maximum,
an increase in the price of good Y— which is a marginal physical product must be
substitute for good X—which of the following
(A) greater than one
will definitely occur?
(B) equal to one
(A) The equilibrium price of good X will (C) equal to zero
decrease. (D) less than zero
(B) The equilibrium price of good X will (E) constant
increase.
(C) The equilibrium quantity of good X will
be unaffected.
(D) The equilibrium quantity of good X will
increase.
(E) The equilibrium quantity of good X will
decrease.

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52. Garcia is currently spending his entire lunch 56. Which of the following is true of a monopolisti-
budget on 3 sodas and 4 hot dogs. At his current cally competitive firm in long-run equilibrium?
level of consumption, Garcia’s marginal utility for
(A) Price equals marginal cost and average total
sodas is 5 utils and his marginal utility for hot
cost.
dogs is 10 utils. In order to maximize his total
(B) Price equals average total cost but is greater
utility, Garcia should
than marginal cost.
(A) consume more sodas and fewer hot dogs (C) Price equals marginal cost and is greater than
regardless of the prices average total cost.
(B) consume more hot dogs and fewer sodas (D) The firm makes no attempt to differentiate its
regardless of the prices products.
(C) maintain his current level of consumption (E) The firm earns positive economic profits by
of sodas and hot dogs regardless of the producing at minimum average cost.
prices
(D) maintain his current level of consumption 57. Assume that firms sell their output in a perfectly
if the price of a soda is $1 and the price competitive product market and hire labor in a
of a hot dog is $2 perfectly competitive labor market. If all other
(E) maintain his current level of consumption factors remain constant, an increase in the demand
if the price of a soda is $2 and the price for the firms’ product will result in which of the
of a hot dog is $1 following changes in the labor market?
(A) Firms will move down along the demand
53. As output of a firm increases, the difference
curve for labor and hire more workers.
between the firm’s average total cost and its
(B) The supply curve for labor will shift to the
average variable cost gets smaller because the
right.
firm’s
(C) The demand curve for labor will shift to the
(A) total cost is increasing right.
(B) marginal cost is increasing (D) The supply curve for labor will shift to the left.
(C) average fixed cost is decreasing (E) The demand curve for labor will shift to the
(D) marginal product of labor is decreasing left.
(E) long-run average total cost is decreasing
58. A profit-maximizing firm will continue to hire
54. In a perfectly competitive market, a change in workers until the
which of the following could cause a shift in
(A) marginal factor cost of labor is equal to the
the supply curve?
marginal revenue product of labor
(A) The incomes of consumers (B) marginal factor cost of labor is equal to the
(B) The number of buyers price of the good produced using labor
(C) Technology (C) marginal product of labor is equal to the
(D) The price of the product marginal revenue product of labor
(E) Tastes and preferences (D) marginal product of labor is equal to the
marginal factor cost of labor
55. Productive efficiency occurs when a firm produces (E) marginal product of labor is equal to the
output at a level at which price of labor
(A) average total cost equals average revenue
(B) average total cost is at a minimum
(C) price exceeds average total cost
(D) price equals marginal cost
(E) marginal revenue exceeds average revenue

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59. Assume that the marginal social benefit of the last 60. Which of the following government actions can
unit of vaccination provided is greater than the correct the inefficiency caused by the existence of
marginal social cost. Which of the following can a monopoly?
be used to achieve efficiency in the market for
(A) Granting a per-unit subsidy on the
vaccination?
monopolist’s output
(A) A per-unit subsidy for vaccinations (B) Granting an annual lump-sum subsidy to the
(B) A lump-sum tax for vaccinations monopolist
(C) A limit on the quantity of vaccinations (C) Imposing a per-unit tax on the monopolist’s
(D) A price floor for vaccinations output
(E) A price ceiling for vaccinations (D) Imposing a price floor on the monopolist
(E) Limiting the monopolist's production through
regulation

END OF SECTION I

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CHECK YOUR WORK ON THIS SECTION.

DO NOT GO ON TO SECTION II UNTIL YOU ARE TOLD TO DO SO.

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 MICROECONOMICS
Section II
Planning time—10 minutes
Writing time—50 minutes

Directions: You have 10 minutes to read all of the questions in this booklet, to sketch graphs, to make
notes, and to plan your answers. You will then have 50 minutes to answer all three of the following
questions. 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. In answering the questions, you should emphasize
the line of reasoning that generated your results; it is not enough to list the results of your analysis. 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. Use a pen with black or
dark blue ink.

Question 1 begins on page 4.

Question 2 begins on page 10.
Question 3 begins on page 14.

THIS PAGE MAY BE USED FOR TAKING NOTES AND PLANNING YOUR ANSWERS.
NOTES WRITTEN ON THIS PAGE WILL NOT BE SCORED.
WRITE ALL YOUR RESPONSES ON THE LINED PAGES.

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1. Assume soybeans are produced by a perfectly competitive, constant-cost industry. Fresh Farm is a typical firm
producing soybeans and is currently operating with an economic loss.
(a) Using a correctly labeled graph for Fresh Farm, show each of the following in the short run.
(i) The marginal cost curve and average total cost, labeled MC and ATC, respectively
(ii) Fresh Farm’s price and loss-minimizing quantity, labeled PF and QF, respectively
(iii) The average variable cost curve, labeled AVC
(b) Suppose that newspapers have recently reported that excessive soybean consumption can cause health
problems. As a result, will the new loss-minimizing quantity for Fresh Farm be greater than, less than, or
equal to QF in the short run? Explain.
(c) Is the long-run market supply for soybeans perfectly inelastic, relatively inelastic, unit elastic, relatively
elastic, or perfectly elastic?
(d) Assume now that the soybean market is in a long-run equilibrium and that fertilizers used in soybean
production cause water pollution. Using a correctly labeled graph for the soybean market, show each of the
following.
(i) Market equilibrium quantity and price, labeled QM and PM
(ii) Marginal social cost curve, labeled MSC
(iii) Socially optimal quantity, labeled QS
(iv) The area representing deadweight loss, shaded completely

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ANSWER PAGE FOR QUESTION 1

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Question 1 is reprinted for your convenience.

1. Assume soybeans are produced by a perfectly competitive, constant-cost industry. Fresh Farm is a typical firm
producing soybeans and is currently operating with an economic loss.
(a) Using a correctly labeled graph for Fresh Farm, show each of the following in the short run.
(i) The marginal cost curve and average total cost, labeled MC and ATC, respectively
(ii) Fresh Farm’s price and loss-minimizing quantity, labeled PF and QF, respectively
(iii) The average variable cost curve, labeled AVC
(b) Suppose that newspapers have recently reported that excessive soybean consumption can cause health
problems. As a result, will the new loss-minimizing quantity for Fresh Farm be greater than, less than, or
equal to QF in the short run? Explain.
(c) Is the long-run market supply for soybeans perfectly inelastic, relatively inelastic, unit elastic, relatively
elastic, or perfectly elastic?
(d) Assume now that the soybean market is in a long-run equilibrium and that fertilizers used in soybean
production cause water pollution. Using a correctly labeled graph for the soybean market, show each of the
following.
(i) Market equilibrium quantity and price, labeled QM and PM
(ii) Marginal social cost curve, labeled MSC
(iii) Socially optimal quantity, labeled QS
(iv) The area representing deadweight loss, shaded completely

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ADDITIONAL PAGE FOR ANSWERING QUESTION 1

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ADDITIONAL PAGE FOR ANSWERING QUESTION 1

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ADDITIONAL PAGE FOR ANSWERING QUESTION 1

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2. The graph above shows the perfectly competitive corn market.
(a) Between the prices of $9 and $11, is the demand for corn relatively elastic, perfectly elastic, unit elastic,
relatively inelastic, or perfectly inelastic? Explain using specific values.
Suppose the government is considering different programs to help corn farmers in the market represented above.
(b) Program 1: The government establishes a price floor at $11. How much corn will be purchased by
consumers?
(c) Program 2: The government guarantees a market price of $11 by purchasing all the surplus corn. How much
corn will the government need to purchase?
(d) Program 3: The government pays farmers to switch to wheat production. Redraw the graph of the corn
market above including the numbers, and show the shift that illustrates how paying farmers to switch to
wheat production can achieve a market price of $11 for corn.
(e) Program 4: The government successfully markets corn as an export.
(i) Explain how increasing exports can achieve a market price of $11.
(ii) Calculate the producer surplus when the government successfully raises the price of corn to $11 by
marketing it as an export. Show your work.

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ANSWER PAGE FOR QUESTION 2

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ADDITIONAL PAGE FOR ANSWERING QUESTION 2

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3. Schmitt’s Bakery sells cookies in a perfectly competitive market and hires workers from a perfectly competitive
labor market. Labor is the only variable input for Schmitt’s Bakery. The table below shows the workers hired
per day, quantity of cookies produced per day, and total costs per day for Schmitt’s Bakery. The price of a
cookie is $0.50.

Number of Quantity of Total Cost

Workers Hired Cookies
0 0 $10
1 45 $25
2 105 $40
3 145 $55
4 180 $70
5 195 $85
6 200 $100

(a) When the firm hires the third worker, does it experience diminishing marginal returns?
(b) What is the marginal revenue product of the third worker?
(c) Based on the figures in the table above, what is the wage rate?
(d) What is the profit-maximizing number of workers?
(e) If the demand for cookies increases, will Schmitt’s Bakery hire more, fewer, or the same number of
workers? Explain.

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ANSWER PAGE FOR QUESTION 3

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ADDITIONAL PAGE FOR ANSWERING QUESTION 3

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 STOP

END OF EXAM

THE FOLLOWING INSTRUCTIONS APPLY TO THE COVERS OF THE

SECTION II BOOKLET.

• MAKE SURE YOU HAVE COMPLETED THE IDENTIFICATION

INFORMATION AS REQUESTED ON THE FRONT AND BACK
COVERS OF THE SECTION II BOOKLET.

• CHECK TO SEE THAT YOUR AP NUMBER LABEL APPEARS IN

THE BOX(ES) ON THE COVER(S).

• MAKE SURE YOU HAVE USED THE SAME SET OF AP

NUMBER LABELS ON ALL AP EXAMS YOU HAVE TAKEN
THIS YEAR.

-18-
Multiple-Choice Answer Key

The following contains the answers to

the multiple-choice questions in this exam.
Answer Key for AP Microeconomics
Practice Exam, Section I

Question 1: B Question 31: E

Question 2: A Question 32: D
Question 3: D Question 33: E
Question 4: B Question 34: A
Question 5: B Question 35: D
Question 6: E Question 36: D
Question 7: B Question 37: B
Question 8: C Question 38: A
Question 9: D Question 39: C
Question 10: B Question 40: D
Question 11: B Question 41: C
Question 12: A Question 42: E
Question 13: E Question 43: D
Question 14: A Question 44: C
Question 15: C Question 45: A
Question 16: E Question 46: C
Question 17: E Question 47: D
Question 18: B Question 48: B
Question 19: C Question 49: B
Question 20: D Question 50: B
Question 21: C Question 51: C
Question 22: E Question 52: D
Question 23: C Question 53: C
Question 24: C Question 54: C
Question 25: B Question 55: B
Question 26: A Question 56: B
Question 27: D Question 57: C
Question 28: D Question 58: A
Question 29: D Question 59: A
Question 30: B Question 60: A
Free-Response Scoring Guidelines

The following contains the scoring guidelines

for the free-response questions in this exam.
 AP® MICROECONOMICS
2014 SCORING GUIDELINES

Question 1

10 Points (4+1+1+4)

(a) 4 points:
• One point is earned for showing an upward sloping MC curve going through
the minimum point of the ATC curve.
• One point is earned for a correctly labeled graph of the typical firm, Fresh Farm,
with a horizontal demand curve below ATC, showing PF.
• One point is earned for showing the profit-maximizing quantity,
QF at MC=MR or MC=P if P is horizontal.
• One point is earned for showing the AVC curve below the price line at QF.

(b) 1 point:
• One point is earned for stating that the new quantity will be less than QF,
since demand decreases or price decreases.

(c) 1 point:
• One point is earned for stating that the long-run market supply for soybeans
is perfectly elastic.

© 2014 The College Board. All rights reserved.

Visit the College Board on the Web: [Link].
 AP® MICROECONOMICS
2014 SCORING GUIDELINES

Question 1 (continued)

(d) 4 points:
• One point is earned for drawing a correctly labeled graph for the soybean market showing
a downward sloping demand curve (or MSB), supply curve (or MPC), equilibrium quantity,
QM, and price, PM.
• One point is earned for drawing the marginal social cost curve above the supply curve.
• One point is earned for showing the socially optimal quantity,
QS, at MSB=MSC or D=MSC.
• One point is earned for showing the area representing the deadweight loss,
shaded completely.

© 2014 The College Board. All rights reserved.

Visit the College Board on the Web: [Link].
 AP® MICROECONOMICS
2014 SCORING GUIDELINES

Question 2

6 Points (1+1+1+1+2)

(a) 1point:
• One point is earned for stating that demand is elastic because:
(can use any one of the following as an explanation)
o Calculated percentage change in quantity is greater than the calculated percentage
change in price.
o Calculated elasticity is greater than 1.
o The total revenue increases from $440 to $540 when price decreases from $11 to $9.

(b) 1 point:
• One point is earned for stating that 40 units are purchased by consumers.

(c) 1 point:
• One point is earned for stating that the government purchases 75 – 40 = 35 units.

(d) 1 point:
• One point is earned for redrawing the graph so that the supply curve shifts to the left
resulting in PE = $11 and QE = 40.

(e) 2 points:
• One point is earned for stating that the increase in export will increase the demand
for corn or shifts the demand curve to the right.
• One point is earned for calculating the producer surplus.
PS = ½ × ($11−$1) × 75 = ½ × $10 × 75 = $375.

© 2014 The College Board. All rights reserved.

Visit the College Board on the Web: [Link].
 AP® MICROECONOMICS
2014 SCORING GUIDELINES

Question 3

5 Points (1+1+1+1+1)

(a) 1 point:
• One point is earned for stating yes.

(b) 1 point:
• One point is earned for calculating the MRP of the third worker:
40 × $0.50 or $20.

(c) 1 point:
• One point is earned for identifying the wage rate, $15.

(d) 1 point:
• One point is earned for identifying the profit-maximizing number of workers is 4.

(e) 1 point:
• One point is earned for stating that Schmitt’s Bakery will hire more workers,
because the increase in demand for cookies increases the MRP or VMP or price
or marginal revenue.

© 2014 The College Board. All rights reserved.

Visit the College Board on the Web: [Link].
Scoring Worksheet

The following provides a scoring worksheet and conversion table

used for calculating a composite score of the exam.
 2014 AP Microeconomics Scoring Worksheet

Section I: Multiple Choice

1.0000 =
Number Correct Weighted Section I Score
(out of 60) (Do not round)

Section II: Free Response

Question 1 1.5000 =
(out of 10) (Do not round)

Question 2 1.2500 =
(out of 6) (Do not round)

Question 3 1.5000 =
(out of 5) (Do not round)

Sum =
Weighted
Section II
Score
(Do not round)

Composite Score

+ =
Weighted Weighted Composite Score
Section I Score Section II Score (Round to nearest
whole number)

AP Score Conversion Chart

Microeconomics
Composite
Score Range AP Score
74-90 5
59-73 4
49-58 3
38-48 2
0-37 1
 AP Microeconomics

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