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

Note:I’ve also shaded the areas of consumer surplus and deadweight loss, which were not
required in this practice problem. Because a more thorough analysis of monopoly has been
asked on recent exams, be sure that you can identify monopoly profit, deadweight loss, and
consumer surplus.

Question:So I’ve messed up the monopoly quantity, have I lost all points in part (C)?

Answer:Again, maybe not, but the rest of your response must be consistent with the incor-
rectly labeled output. In the figure below I have tried to replicate one possible incorrectly
identified output, but consistent price and profit.

An Alternative Scoring for Part (C).
This graph shows output where demand intersects MC, not where MR = MC. This
response cannot be given the point for a correct level of output. However, you would likely
get a point for a correctly drawn monopoly figure, a price Pmthat is consistent with the Qm
in this figure, and a profit area that is also consistent with Qmand Pm.

Question 2 (7 points)

Part (A): 2 points
1 point: Labor =1, Lemons = 4

1 point: This is the least-cost combination of inputs because the ratio of marginal product
per dollar is equal for both inputs and Eli stays within his budget of $14.

MPlabor/Plabor=MPlemons/Plemons

Demand

Quantity

$

Marginal Revenue

Marginal Cost

AT C

Average Total

Cost

Profit > 0

Qm

Pm

Demand Quantity

$

Marginal Revenue

Marginal Cost

Qm

Pm

AT C

Average Total

Cost

Profit > 0

DWL

Consumer surplus

AP Microeconomics Practice Exam 1 ‹ 183