5 Steps to a 5 AP Microeconomics, 2014-2015 Edition

1. Bob’s Beans is a perfectly competitive soybean
   producer. The short-run price of soybeans is cur-
   rently below average total cost, but above Bob’s
   shutdown point.

(A) Using two correctly labeled graphs, show the

soybean market side by side with Bob’s

Beans. Clearly indicate which graph repre-

sents the market and which represents Bob’s

Beans. In your graphs, identify

i. price and quantity in the soybean market.

ii. price and quantity for Bob’s Beans.

iii. the area of economic profit or loss for

Bob’s Beans.

(B) In a new set of side-by-side graphs for both

the market and Bob’s Beans, show the long-

run adjustment in each of the following:

i. Price and quantity in the soybean market

ii. Price and quantity for Bob’s Beans

(C) Suppose now that Bob’s Beans is a monopoly

producer of soybeans. In a correctly labeled

graph, show a profit-maximizing monopolist

and indicate each of the following:

i. Price

ii. Output

iii. The area of economic profit or loss for

Bob’s Beans

2. Eli’s lemonade stand employs only labor and
   lemons to produce lemonade. The table below
   shows how total production changes at different
   combinations of labor and lemons. Lemonade
   sells in a competitive market at $1 per cup.

TOTAL

HOURS TOTAL POUNDS PRODUC-

OF LABOR PRODUCTION OF LEMONS TION

0 00000

11 2 1 09

22 2 217

330 323

436 427

539 529

640 630

(A) In competitive input markets, each hour of

labor costs $6 to employ and each pound of

lemons costs $2 to employ. If Eli has a $14

budget for hiring inputs, identify the least-

cost combination of labor and lemons.

Explain your reasoning.

(B) At the least-cost combination of labor and

lemons, identify each of the following:

i. The output produced

ii. The economic profit earned

(C) Identify the profit-maximizing quantities of

labor and lemons. At the profit-maximizing

quantities of labor and lemons, identify each

of the following:

i. The output produced

ii. The economic profit earned

180 › Step 5. Build Your Test-Taking Confidence

AP Microeconomics Practice Exam 1, Section II

Free-Response Questions

Planning time—10 minutes

Writing time—50 minutes

At the conclusion of the planning time, you have 50 minutes to respond to the following three questions.

Approximately half of your time should be given to the first question, and the second half should be divided

evenly between the remaining two questions. Be careful to clearly explain your reasoning and to provide clear

labels to all graph axes and curves.

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