Top 10 AP Econ Mistakes

The 2012AP Microeconomics Exams

Dave AndersonCentre CollegeChief ReaderAgendaExam Developers ScoresAreas of StrengthAreas of WeaknessDiscussionConfidential and Proprietary Not for Distribution

Where to find this presentation (under Miscellaneous).3Microeconomics

Committee ChairPamela M. Schmitt, United States Naval AcademyMichael A. Brody, Menlo School

Committee MembersLuis F. Fernandez, Oberlin CollegeMargaret Ray, Mary Washington CollegeDee Mecham, The Bishops SchoolSandra K. Wright, Adlai E. Stevenson High School

College Board AdvisorMary Kohelis, Brooke High School

Chief ReaderDavid Anderson, Centre College

ETS Assessment SpecialistsFekru DebebeHwanwei Zhao

4ExamsMicroeconomics59,000 Operational Exams3,300 Alternate Exams

Mean / Standard Deviation / MaxMonopoly4.662.8310Consumer Choice Theory2.461.646Supply and Demand1.591.295

Scores 2012514.8%428.3% 321.8%216.3%118.8%Scores 2012514.8%428.3% 321.8%216.3%118.8%201114.6%25.9% 21.6%16.0%21.9%

Students Did Great OnMonopoly GraphMarginal Revenue and Demand CurvesProfit Max Quantity where MR = MCPrice on Demand Curve above Q*

Finding Total Utility by Summing MU

Identifying Domestic Production Level in Situation with Imports and a Tariff

Most Common ErrorsAP Microeconomics2012

Overview of Trouble Spots9. Optimal Consumption Rule7. Effect of Subsidy on Quantity Produced6. Effect of Lump-Sum Subsidy on Deadweight Loss

5. Tariff Revenue4. Value of Consumer Surplus3. Cross-price Elasticity2. Effect of Price Increase on Total RevenueSurplus-maximizing Tariff

Special Mention: Labels!9. Micro 2 (a)(ii)Question: Theresas weekly income is $11, the price of a bagel is $2, and the price of a toy car is $1. What quantity of bagels and toy cars will maximize Theresas utility if she spends her entire weekly income on bagels and toy cars? Explain your answer using marginal analysis. 15

Question: Theresas weekly income is $11, the price of a bagel is $2, and the price of a toy car is $1. What quantity of bagels and toy cars will maximize Theresas utility if she spends her entire weekly income on bagels and toy cars? Explain your answer using marginal analysis. Quantity of BagelsMarginal Utility from Bagels (utils)Quantity of Toy CarsMarginal Utility from Toy Cars (utils)1811027283636454454536362

Question: Theresas weekly income is $11, the price of a bagel is $2, and the price of a toy car is $1. What quantity of bagels and toy cars will maximize Theresas utility if she spends her entire weekly income on bagels and toy cars? Explain your answer using marginal analysis. Quantity of BagelsMarginal Utility from Bagels (utils)MUBagels/$Quantity of Toy CarsMarginal Utility from Toy Cars (utils)MUCars/$

18411010273.5288363366452.5444542533631.5622

Question: Theresas weekly income is $11, the price of a bagel is $2, and the price of a toy car is $1. What quantity of bagels and toy cars will maximize Theresas utility if she spends her entire weekly income on bagels and toy cars? Explain your answer using marginal analysis. Quantity of BagelsMarginal Utility from Bagels (utils)MUBagels/$Quantity of Toy CarsMarginal Utility from Toy Cars (utils)MUCars/$

18411010273.5288363366452.5444542533631.5622$1

Question: Theresas weekly income is $11, the price of a bagel is $2, and the price of a toy car is $1. What quantity of bagels and toy cars will maximize Theresas utility if she spends her entire weekly income on bagels and toy cars? Explain your answer using marginal analysis. Quantity of BagelsMarginal Utility from Bagels (utils)MUBagels/$Quantity of Toy CarsMarginal Utility from Toy Cars (utils)MUCars/$

18411010273.5288363366452.5444542533631.5622$2

Question: Theresas weekly income is $11, the price of a bagel is $2, and the price of a toy car is $1. What quantity of bagels and toy cars will maximize Theresas utility if she spends her entire weekly income on bagels and toy cars? Explain your answer using marginal analysis. Quantity of BagelsMarginal Utility from Bagels (utils)MUBagels/$Quantity of Toy CarsMarginal Utility from Toy Cars (utils)MUCars/$

18411010273.5288363366452.5444542533631.5622$3

Question: Theresas weekly income is $11, the price of a bagel is $2, and the price of a toy car is $1. What quantity of bagels and toy cars will maximize Theresas utility if she spends her entire weekly income on bagels and toy cars? Explain your answer using marginal analysis. Quantity of BagelsMarginal Utility from Bagels (utils)MUBagels/$Quantity of Toy CarsMarginal Utility from Toy Cars (utils)MUCars/$

18411010273.5288363366452.5444542533631.5622$4

Question: Theresas weekly income is $11, the price of a bagel is $2, and the price of a toy car is $1. What quantity of bagels and toy cars will maximize Theresas utility if she spends her entire weekly income on bagels and toy cars? Explain your answer using marginal analysis. Quantity of BagelsMarginal Utility from Bagels (utils)MUBagels/$Quantity of Toy CarsMarginal Utility from Toy Cars (utils)MUCars/$

18411010273.5288363366452.5444542533631.5622$6

Question: Theresas weekly income is $11, the price of a bagel is $2, and the price of a toy car is $1. What quantity of bagels and toy cars will maximize Theresas utility if she spends her entire weekly income on bagels and toy cars? Explain your answer using marginal analysis. Quantity of BagelsMarginal Utility from Bagels (utils)MUBagels/$Quantity of Toy CarsMarginal Utility from Toy Cars (utils)MUCars/$

18411010273.5288363366452.5444542533631.5622$8

Question: Theresas weekly income is $11, the price of a bagel is $2, and the price of a toy car is $1. What quantity of bagels and toy cars will maximize Theresas utility if she spends her entire weekly income on bagels and toy cars? Explain your answer using marginal analysis. Quantity of BagelsMarginal Utility from Bagels (utils)MUBagels/$Quantity of Toy CarsMarginal Utility from Toy Cars (utils)MUCars/$

18411010273.5288363366452.5444542533631.5622$10

Question: Theresas weekly income is $11, the price of a bagel is $2, and the price of a toy car is $1. What quantity of bagels and toy cars will maximize Theresas utility if she spends her entire weekly income on bagels and toy cars? Explain your answer using marginal analysis. Quantity of BagelsMarginal Utility from Bagels (utils)MUBagels/$Quantity of Toy CarsMarginal Utility from Toy Cars (utils)MUCars/$

18411010273.5288363366452.5444542533631.5622$11Orfind whereMUBagels/$ = MUCars/$

and all money is spent

Quantity of BagelsMarginal Utility from Bagels (utils)MUBagels/$Quantity of Toy CarsMarginal Utility from Toy Cars (utils)MUCars/$

18411010273.5288363366452.5444542533631.5622

MUBagels/$ = MUCars/$

and all money is spent

32% answered correctly

8. Micro 2 (b)Question: Assume that the price of wheat, an input for the production of bagels, increases. Will Theresas demand for bagels increase, decrease, or not change? Explain.288. Micro 2 (b)Answer: Theresas demand for bagels will not change because the increase in the price of wheat will affect the supply of bagels, not the demand.

(25% answered correctly)7. Micro 1 (c)(i)Question: Assume a per-unit subsidy is provided to Steverail. Will Steverails quantity increase, decrease, or not change? Explain.

7. Micro 1 (c)(i)Answer: Steverails quantity will increase because the MC curve will shift downward and intersect MR at a larger quantity.

(25% answered correctly)6. Micro 1 (d)Question: Assume that a lump-sum subsidy is provided to Steverail. In the short run, will deadweight loss increase, decrease, or not change? Explain.32Answer: Deadweight loss will not change because the profit-maximizing quantity does not change.

(20 percent answered correctly)

6. Micro 1 (d)5. Micro 3 (b)(iii)Question: Suppose that Loriland imposes a per-unit tariff on sugar imports and the new domestic price including the tariff is $4.

Calculate the total tariff revenue collected by the government. You must show your work.34

Question: Suppose that Loriland imposes a per-unit tariff on sugar imports and the new domestic price including the tariff is $4.

Calculate the total tariff revenue collected by the government. You must show your work.

Question: Suppose that Loriland imposes a per-unit tariff on sugar imports and the new domestic price including the tariff is $4.

Calculate the total tariff revenue collected by the government. You must show your work.24Domestic Price

24Domestic Price2 x 4 = 8

20% answered correctly4. Micro 3 (b)(ii)Question: Suppose that Loriland imposes a per-unit tariff on sugar imports and the new domestic price including the tariff is $4.

Calculate the domestic consumer surplus for Loriland. You must show your work.38

Question: Suppose that Loriland imposes a per-unit tariff on sugar imports and the new domestic price including the tariff is $4.

Calculate the domestic consumer surplus for Loriland. You must show your work.Domestic Price510

base x height = x 5 x 10 = 25

18% answered correctlyDomestic Price5103. Micro 2 (d)Question: Suppose that when the price of toy cars increases by 10 percent, Theresa buys 5 percent fewer toy cars and 4 percent less of a different toy, blocks. Calculate the cross-price elasticity of toy cars and blocks and indicate if it is positive or negative.3. Micro 2 (d)Cross-price elasticity = %QBlocks / %Ptoys

= -0.04 / 0.10

= -0.4

3. Micro 2 (d)Answer: -0.4

(15% answered correctly)2. Micro 1 (b)Question: If Steverail raised its price above Pm identified in part (a)(i), would total revenue increase, decrease, or not change? Explain.44

Question: If Steverail raised its price above Pm identified in part (a)(i), would total revenue increase, decrease, or not change? Explain.2. Micro 1 (b)Answer: Total revenue would decrease because the demand is price elastic in that range of the demand curve.(Or because MR > 0).

(12% answered correctly)46PriceQuantityDemand0Marginal RevenueInelastic range

Elastic RangePriceQuantity0Total RevenueOne of the graphs that can be used to teach the relationship between TR and MR/Elasticity.471. Micro 3 (c)Question: Given the world price of $2, what per-unit tariff maximizes the sum of Lorilands domestic consumer surplus and producer surplus?48

A common wrong answer: $3Domestic Price

$0 Tariff1. Micro 3 (c)Answer: $0

7% answered correctly