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

1. Salmon and tuna are substitutes in perfectly com-
   petitive markets that are experiencing long-run
   equilibrium.

(A) Suppose that an unforeseen change in the

weather patterns of the Pacific Ocean dra-

matically reduces the salmon population

while leaving the tuna populations unaf-

fected. In a correctly labeled graph, show

how this weather pattern initially affects:

i. Equilibrium price and quantity in the

market for salmon

(B) Charlie owns a perfectly competitive tuna fish-

ing boat. Explain how changes in the market

for salmon affect each of the following:

i. Price of tuna in the market

ii. Quantity of tuna produced in the market

iii. Quantity of tuna produced by Charlie’s

firm

iv. Economic profit or loss for Charlie’s firm

(C) Suppose that, in the nation of Cascadia, the

domestic price of tuna is higher than the

world price of tuna.

i. Will Cascadia be an exporter or an

importer of tuna? Explain.

ii. If the government of Cascadia acts to

protect domestic tuna producers by

imposing a tariff on foreign tuna, indi-

cate how this policy would affect

• the price that consumers in Cascadia
  pay for tuna.


• consumer surplus in the domestic
  tuna market.
  2. Assume the following about the market for ciga-
  rettes:
  
  
  • Cigarettes are sold in a competitive market.
  
  
  • Cigarettes have no close substitute.
  
  
  • The demand for cigarettes is price inelastic.
  
  
  
  

Suppose now that the government imposes a per

unit excise tax on producers of cigarettes.

(A) Using a correctly labeled graph, show the

impact of the excise tax on each of the follow-

ing in the cigarette market:

i. Price

ii. Output

iii. The area of tax revenue collected by the

government

iv. Deadweight loss from the tax

(B) Given that demand for cigarettes is price

inelastic, will consumer spending on ciga-

rettes increase, decrease, or remain constant?

How do you know?

AP Microeconomics Practice Exam 2 ‹ 201

AP Microeconomics Practice Exam 2, 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.