13. A.
Price elasticityof supply Percentage change in price
Percentage change in the quantity supplied
=14. D.Price elasticityof demand Percentage change in the price
Percentage change in the quantity demanded
=(-30%) / (50%) = -3/5
15. C.
TR= Price ×Quantity
TR (last year) = $2000 = $1000 ×$2.00 TR (this year) = $500 = $500 ×$1.00
Total revenue lost = TR (last year) – TR (this year) = $2000 -$500 = $150016. B.If the price ceiling is lower than the equilibrium price, then the policy has a binding constraint on the market.
This will cause the quantity demand to be greater than the quantity supply, creating a shortage because of the
excess of quantity demanded, thus eliminating choices A and C. This will not shift the supply curve or demand
curve, eliminating choices D and E.- D.
Tax Revenue = Tax ×Quantity sold
$0.40 ×900 = $360
18. A.If the quantity supplied domestically is greater than the quantity demanded, then that country will most likely
export its excess goods to markets that demand them. This implies that the world price is greater than the price
prior to trading, so exports will equal the difference between the domestic quantity supplied and the domestic
quantity demanded at the world price.
19. E.Consumer surplus after trade, given that the price level fell below the price level prior to trading, equals the
consumer surplus before trading (A), plus the increase in consumer surplus due to the price fall (B), plus the
additional imports from the trade (D).- B.Domestic consumers are better off because prior to trade, consumer surplus equaled A;, after trade it includes
regions B and D. Therefore, overall consumer welfare has increased. Producer surplus originally included B and
C, now only equals region C, so they are worse after the trade. However, trade raises the overall economic welfare
of a country because the gains of trade exceed that of the losses. - A.A proportional tax occurs when high-income and low-income taxpayers pay the same fraction of their income
for taxes, eliminate choice B. Regressive tax is a tax for which a high-income person pays a smaller fraction of
their income for taxes than low-income taxpayers, and progressive tax is a tax for which high-income taxpayers
pay a larger portion of their income than low-income taxpayers; this eliminates choices C and D. A flat tax is a
method developed to simplify the taxing system and can take on many different forms of taxing, such as
progressive and proportional tax approaches, eliminating answer E. - B.A public good is both non-excludable (no one can be prevented from using the good) and non-rival (one person’s
use of the good does not diminish another person’s enjoyment of that good). National defense is considered a public
good because is it both non-excludable and non-rival. Choices A, D, and E are private good because they are both
excludable and rival. Choice C is considered a common resource because it is rival but non-excludable—any person
can catch salmon, but once that person catches a fish there are fewer fish to be caught. - D. An accountant’s profit measures the firm’s total revenues minus all the explicit costs, so it would not include
any implicit costs such as opportunity costs. Since the plastic production forfeited in order to produce metal is
regarded as an implicit cost, it will not be included in Tina’s determination of this years total revenues. An
economist’s measurement of profits does take implicit costs into account when determining total revenue. - B.A firm will exit an industry if the revenue from producing a particular good is less than its total costs. Therefore,
answers A, C, and E can all be eliminated. Although profits do equal total revenue minus total cost, it does not
explain why a firm would exit an industry unless it somehow reflects that the profits are in the negative region.
Part IV: AP Macroeconomics & Microeconomics Tests