AP Microeconomics FRQ Room

Analyzing Trade-offs Using Production Possibilities and Opportunity Cost

This question requires you to analyze trade-offs using a production possibilities frontier (PPF) and

Comparative Advantage and International Trade

This question focuses on comparative advantage and its role in international trade. Answer all parts

Comparative Advantage in Production Decisions

Discuss the concept of comparative advantage and how it influences specialization in production.

Consumer Choice under Budget Constraints

This question involves applying the marginal utility per dollar rule to determine the optimal consum

Cost-Benefit Analysis in Business Decisions

Analyze how cost-benefit analysis, including both explicit and implicit costs, informs business deci

Cost-Benefit Analysis: Evaluating Investment Decisions

This question examines the steps involved in cost-benefit analysis and its application to investment

Economic Systems: Market, Command, and Mixed Economies

Discuss the different types of economic systems, highlighting their characteristics and how they add

Evaluating Efficiency in an Economy

An economy is operating on its Production Possibilities Frontier (PPC), yet evidence suggests that t

Factors of Production: Their Roles in the Economy

This question explores the factors of production and their importance. Be sure to answer all parts.

FRQ 3: Cost-Benefit Analysis and Decision Making

This question evaluates your understanding of cost-benefit analysis and its importance for decision

FRQ 7: Comparing Microeconomics and Macroeconomics

This question compares the two primary branches of economics by examining their scope, focus, and re

FRQ 11: Profit Maximization in Competitive Markets

This question involves applying the principles of profit maximization in a perfectly competitive mar

FRQ 19: Trade-offs Between Consumer Goods and Capital Goods

This question examines the trade-offs an economy faces when deciding between the production of consu

Graphical Analysis of Demand Elasticity

Interpret a graphical representation of demand for Product Z and analyze consumer responsiveness to

Impact of Economic Growth on Production Possibilities

An economy initially has a production possibilities frontier (PPC) connecting 100 units of Good A to

Impact of Scarcity on Innovation: A Case Study

Evaluate how scarcity of critical resources affects a firm's innovation and production strategies.

Labor vs. Capital: Analyzing Factors of Production

Evaluate the efficiency of resource allocation by comparing the use of labor and capital in producti

Marginal Analysis in Production Decisions

Apply the concepts of marginal cost and marginal revenue using marginal analysis to determine the pr

Marginal Utility and Consumer Equilibrium

Analyze how consumers achieve equilibrium by maximizing utility through the optimal allocation of th

Microeconomics vs. Macroeconomics Analysis

This question focuses on differentiating microeconomics and macroeconomics and their applications.

Microeconomics vs. Macroeconomics: Analyzing Economic Perspectives

Compare and contrast microeconomics and macroeconomics, and analyze how each field addresses economi

Microeconomics vs. Macroeconomics: Scope and Focus

This question addresses the differences between microeconomics and macroeconomics. Answer each part

Opportunity Costs and Trade-offs in Consumer Choices

Examine the concepts of opportunity costs and trade-offs in consumer decision-making.

Optimal Consumption and Marginal Utility Analysis

A consumer has a budget of $$100$$ to spend on Good X and Good Y. The price of Good X is $$10$$ and

Optimal Consumption Rule and Marginal Utility per Dollar

This question explores the application of the optimal consumption rule in consumer choice. Answer al

Positive vs. Normative Economics Analysis

Analyze the difference between positive and normative economics and evaluate their roles in economic

Price Elasticity of Demand and Revenue Implications

This question examines price elasticity of demand and its effects on total revenue using empirical d

Production Possibilities Curve (PPC) Analysis

Analyze the Production Possibilities Curve (PPC) and the implications of shifts in the curve.

Production Possibilities Curve (PPC) and Economic Growth

This question focuses on the Production Possibilities Curve (PPC) as a tool to illustrate trade-offs

Production Possibilities Curve Analysis

An economy operates at full employment with a Production Possibilities Curve (PPC) that represents t

Supply and Demand: Scarcity and Resource Allocation

Examine how resource scarcity affects market equilibrium and surplus measures using a supply and dem

Technological Advancements and Economic Growth Analysis

Technological innovation can spur economic growth. Suppose a breakthrough in renewable energy techno

Trade-offs Between Productive Efficiency and Allocative Efficiency

Evaluate how trade-offs between productive and allocative efficiencies can influence economic policy

Analyzing Diminishing Marginal Utility and Demand

This question explores the concept of diminishing marginal utility and its relationship to the downw

Analyzing Taxation and Elasticity in Market Outcomes

Assess the incidence of a per-unit tax in a market with elastic demand and inelastic supply.

Analyzing the Effects of Market Interventions Using Supply and Demand Functions

This question focuses on integrating supply and demand functions with market interventions to analyz

Basic Demand Analysis

This question examines the law of demand and the factors that cause the demand curve to slope downwa

Changes in Consumer Preferences and Demand Shifts

Examine how changes in consumer tastes influence market demand.

Changes in Consumer Preferences and Market Equilibrium

A new trend increases the popularity of a specific tech gadget, causing a shift in consumer preferen

Congestion in Urban Real Estate Development

Urban real estate development can create significant negative externalities such as increased noise

Consumer and Producer Surplus Changes with a Demand Shift

This question assesses your ability to analyze welfare changes when there is a shift in demand. Answ

Cross Price Elasticity: Substitutes vs. Complements

Cross price elasticity of demand measures how the quantity demanded for one good responds to a chang

Deadweight Loss from Market Interventions

This question examines the concept of deadweight loss (DWL) due to market distortions. Answer the fo

Double Shift: Simultaneous Increase in Demand and Supply

In a market where both demand and supply increase simultaneously, analyze how the equilibrium price

Double Shifts in Supply and Demand

This question investigates scenarios in which both supply and demand shift simultaneously and the ch

Effects of a Price Ceiling in the Essential Medicines Market

To ensure affordability of essential medicines, the government imposes a price ceiling at $35 in a m

Elasticity of Supply: Short-run vs Long-run Analysis

A study in the widget market provides the following data: At a price of $$25$$, the quantity supplie

Evaluating Substitution and Income Effects on Demand

Assess how a change in the price of a normal good affects consumer choice through substitution and i

Evaluation of a Price Floor in the Smartphone Market

In the competitive smartphone market, the equilibrium is at $400 for 10,000 smartphones sold monthly

FRQ 2: Supply Response in the Automotive Tire Market

An automotive tire manufacturer experiences a technological innovation that lowers its production co

FRQ 4: Calculating Price Elasticity of Demand and its Impact on Total Revenue

A local restaurant charges $10 for a specific dish and sells 100 plates per day. After reducing the

FRQ 6: Market Intervention - Analysis of a Price Floor

Consider a market described by the demand function $$D: P = 150 - 2*Q$$ and the supply function $$S:

FRQ 7: Calculating Income Elasticity of Demand

A department store finds that when consumer incomes increase by 5%, the quantity demanded for brande

FRQ 12: Double Shift Scenario in a Market

Suppose a new health study increases the demand for a nutritious beverage, shifting the demand curve

FRQ 13: Elasticity and Total Revenue Test

A firm observes that when it increases the price of its product from $$P = 10$$ to $$P = 12$$, the q

FRQ 14: Long-Run Adjustments in Perfect Competition

A perfectly competitive market initially experiences short-run economic profits. Over time, new firm

FRQ 16: Impact of External Shocks on the Oil Market

A major technological discovery has significantly reduced the cost of extracting oil. Assume the ini

FRQ 18: Variable Elasticity Across Price Ranges

Consider a good that exhibits different elasticities in separate price ranges. The following tables

FRQ 19: Effects of Import Quotas in International Trade

A country imposes an import quota on automobiles to protect domestic producers. The domestic market

Graphical Analysis of Price Floors and Surpluses

This question delves into the concept of price floors and their impact on market surpluses and deadw

Hazardous Waste in Electronics Manufacturing

Electronics manufacturing can produce hazardous waste that creates significant environmental damage.

Impact of a Government-Imposed Price Floor

Examine the effects of a government-imposed price floor on a market.

Impact of Government-Imposed Price Floor in the Agricultural Market

A government has set a price floor for wheat at $3 per unit in an effort to support farmers. Prior t

Impact of Minimum Wage as a Price Floor in the Labor Market

In a competitive labor market for unskilled workers, the equilibrium wage is $12 per hour with 100,0

Impact of Price Ceilings on Markets

This question focuses on the effects of price ceilings. Answer the following: (a) Define what a pri

Impact of Price Floors on Markets

This question examines the effects of price floors on market outcomes. Answer the following: (a) De

Impact of Technological Innovation on Supply

This question examines the impact of technological innovation on the supply curve and how it affects

Implications of a Price Floor in the Athletic Shoes Market

A price floor of $70 is set in the athletic shoes market where the equilibrium price is $60 with 600

Income Effect on Demand for Normal and Inferior Goods

Analyze how changes in consumer income affect the demand for normal and inferior goods.

Income Elasticity and Good Classification

Income elasticity of demand measures how quantity demanded changes in response to changes in consume

International Trade Policies: Tariffs and Quotas Impact on Domestic Markets

This question explores the impact of international trade policies on domestic markets, focusing on t

International Trade: Tariffs and Quotas Impact

This question requires an analysis of government policies on international trade and their effects o

Interpreting a Price Elasticity Study

A price study for a consumer product shows that when the price decreases from $50 to $40, the quanti

Interpreting Supply Shifts due to Changes in Input Costs

Analyze the impact of an increase in the cost of raw materials on the supply curve in a competitive

Noise Externality in Restaurant Operations

A restaurant operating late at night generates noise that disturbs local residents, creating a negat

Pollution from Inter-City Bus Services

In the inter-city bus market, increased bus frequency leads to added traffic congestion and pollutio

Producer Surplus and Consumer Surplus Calculation

In a market characterized by the demand curve $$P = 100 - Q$$ and the supply curve $$P = 20 + 0.5Q$$

Supply Analysis and Market Response

This question examines the basic concept of supply, the effects of technological change on productio

Supply Shift: Impact of Technology on Production

A technological innovation reduces production costs for suppliers in the market for Product Y. Analy

Urban Congestion from Ride-Hailing Services

Ride-hailing services in a busy city contribute to increased traffic congestion and pollution. The e

Waste Disposal in Pharmaceutical Production

A pharmaceutical company produces surplus medications that eventually become waste, leading to envir

Waste Management in the Fast Food Industry

The fast food industry generates substantial waste, creating a negative externality for local commun

Analyzing Break‐Even and Shutdown Points

Define and contrast the break‐even point and the shutdown point for a firm in a competitive market.

Analyzing MC and AVC: A Graphical Perspective

Interpret the relationship between the marginal cost (MC) and average variable cost (AVC) curves usi

Bottled Water Production and Plastic Waste

The production of bottled water has externalities associated with plastic waste. Evaluate the result

Cost Curve Analysis and Graph Interpretation

A firm’s cost structure is illustrated in the graph provided. The graph displays the Marginal Cost (

Derivation of Cost Functions

A firm's total cost is composed of fixed and variable costs. Derive the total cost function and anal

Economies and Diseconomies of Scale Analysis

Discuss the impact of economies and diseconomies of scale on a firm's long-run cost structure using

Effect of a Per-Unit Subsidy on Production and Deadweight Loss

A government introduces a per-unit subsidy of $3 for a firm operating in a competitive market. The f

Electronics Manufacturing and E-Waste

The manufacturing of electronic products is associated with e-waste, a negative externality that imp

Estimating Average and Marginal Costs from a Cost Function

Given the total cost function $$TC(Q)= 5 + 2*Q + Q^2$$, (a) Derive the expressions for average tota

Ethanol Production and Land Use Externalities

Ethanol production can lead to land use externalities, leading to environmental degradation not refl

FRQ 4: Profit Calculation and Types of Profit

Firm C produces 200 units of its product and sells each unit at a market price of $10. The firm incu

FRQ 8: Impact of New Technology on Production and Costs

A manufacturing firm introduces new machinery that increases the marginal product of labor (MPL) fro

FRQ 13: Cost Structure and Profit Maximization in a Bakery

A bakery has a fixed cost of $300 and a variable cost function given by $$VC(Q) = 2 * Q + 0.5 * Q^2$

FRQ 15: Impact of Increased Rental Rate on Production

A firm that utilizes both labor and capital to produce goods faces an increase in the rental rate of

FRQ 17: Marginal Cost and Revenue in Competitive Firms

In a perfectly competitive market, a firm’s output decision is determined by comparing marginal cost

Graph Analysis of Perfect Competition Market Supply and Demand

The following graph represents the market for Good X in a perfectly competitive market. Answer the

Graphing Average and Marginal Cost Curves

Construct a diagram that includes the Average Total Cost (ATC), Average Variable Cost (AVC), and Mar

Impact of Factor Input Changes on the Production Function

A firm produces output using both capital and labor. The table below provides data for different com

Impact of Government Tax on Production Costs

A local government imposes a fixed tax of $50 on a firm that previously faced a cost function of $$T

Impact of Technological Improvement on the Production Function

A firm initially has a marginal product of labor given by $$MPL_{old} = 40 - 3*L$$. After adopting n

Long-Run Equilibrium and Normal Profit in Perfect Competition

Analyze how firms in a perfectly competitive market achieve long-run equilibrium with normal profit.

Long‐Run Cost Behavior and Economies of Scale

In the long run, all inputs are variable. Firms experience different cost behaviors as output increa

Market Supply Determination from Firm‐Level Cost Functions

In a perfectly competitive market, the market supply curve is derived from the aggregation of indivi

Production Decisions Under Government Subsidies

A government subsidy of $$S = 2$$ per unit is provided to a firm whose original cost function is $$T

Production Function Analysis

This question examines the production function and marginal product concepts. Consider the table pro

Production Function Analysis and Diminishing Returns

A manufacturing firm produces widgets using labor as its only variable input. The production functio

Profit Calculation and Cost Curve Graph Analysis

The table below shows a firm’s output levels along with corresponding total revenue and total cost v

Profit Maximization in a Competitive Firm

A perfectly competitive firm has a total cost function given by $$TC(Q) = 20 + 4*Q + Q^2$$ and faces

Role of Implicit Costs in Economic Decision-Making

A consultant leaves a job with an annual salary of $80,000 to start his own firm. The firm’s explici

Short‐Run Shutdown Decision

A firm faces a fixed cost of $150 and a variable cost function given by $$VC(Q) = 5*Q + 0.5*Q^2$$. T

Technological Improvements and Cost Impact

A firm adopts a new technology that increases the marginal product of labor. (a) Explain how this

Trade‐Offs Between Fixed and Variable Inputs

A firm that has been operating in the short run (with at least one fixed input) decides to shift to

Barriers to Entry in Various Market Structures

The degree of barriers to entry distinguishes market structures. Using the table provided, answer th

Calculating Output in a Price-Discriminating Monopoly

Analyze a price-discriminating monopolist's decision-making process and calculate optimal outputs an

Collusion and Cartel Behavior in Oligopolies

Examine the reasons behind cartel formation and the challenges such groups face in maintaining collu

Comparative Efficiency in Monopolistic Competition vs. Monopoly

Compare the efficiency outcomes in a monopolistic competition market and a pure monopoly.

Comparing Profit Maximization in Monopoly vs. Perfect Competition

Contrast the profit-maximization strategies of a monopoly with those of a firm in a perfectly compet

Cost Analysis in a Monopoly: Production Decisions Using MC and ATC

This question requires you to analyze a monopolist's cost structure, determine the profit-maximizing

Cost Evaluation for Craft Clothing Co.

Craft Clothing Co. operates in a market with imperfect competition. The firm has a fixed cost of $40

Cost Structures in Monopolistic Competition

Examine the implications of cost structures on firm behavior in monopolistic competition.

Dominant Strategy and Nash Equilibrium in Oligopoly

Analyze a strategic decision scenario in an oligopolistic market using game theory.

Efficiency Analysis in Imperfect Markets

Examine the concepts of allocative and productive efficiency and compare efficiency outcomes between

Elasticity and Marginal Revenue in Monopoly Pricing

This question links the concepts of price elasticity of demand and marginal revenue (MR) in monopoly

Environmental Tax in the Car Manufacturing Market

To combat environmental pollution, the government has imposed a $3 per‐unit environmental tax on car

Examining Production in a Software Solutions Firm

A software solutions firm operates in an imperfectly competitive market. The firm has a fixed cost o

FRQ 12: Repeated Game in Oligopoly Collusion

In an oligopolistic market, two firms interact repeatedly over time. Their decisions to cooperate or

FRQ 15: Stackelberg Leadership in Oligopoly

In an oligopolistic market, one firm acts as a leader while the other acts as a follower. The firms’

FRQ 18: Merger Effects in Oligopolistic Markets

In an oligopolistic industry composed of four firms, a merger takes place resulting in a combined fi

Game Theory in Oligopoly: Dominant Strategies and Nash Equilibrium

Consider an oligopolistic market where Firms A and B have the following payoff matrix (values repres

Game Theory in Oligopoly: Dominant Strategy and Nash Equilibrium

Consider a duopoly where each firm must choose between cooperating or competing. Use game theory to

Government Intervention in Luxury Smartphone Accessories Market

Consider a monopolistically competitive market for luxury smartphone accessories. Firms differentiat

Government Intervention in Natural Monopolies

Evaluate the need for government intervention in natural monopolies and its impact on pricing and ma

Graphical Analysis of Monopoly Pricing and Output

Analyze how a monopolist determines its output and price, and explain the resulting market inefficie

Impact of Price Discrimination under Per‐Unit Tax

A monopolist that typically practices perfect price discrimination (charging each consumer their max

International Externalities in the Steel Market

An international steel producer, operating in an imperfectly competitive market, generates considera

Market Concentration and Collusion in Oligopolies

Market concentration in oligopolistic industries can lead to collusion. Analyze how high market conc

Market Entry and Demand Curve Adjustments in Monopolistic Competition

This question investigates how the entry of new firms affects the demand curve faced by an incumbent

Market Externality in the Agricultural Sector

A large agricultural firm uses heavy fertilizer application that results in runoff, causing water po

Market Externality in the Craft Brewery Industry

A local craft brewery in an imperfectly competitive market faces negative externalities due to incre

Market Structures and Innovation: Role of Economies of Scale

Analyze how economies of scale contribute to the formation of natural monopolies and discuss policy

Monopoly Profit Maximization and Price Discrimination Analysis

Consider a monopolist with the following market conditions: Demand function $$P = 100 - 2*Q$$, and M

Monopoly Profit Maximization and Regulation

This question requires analysis of a monopoly firm's profit-maximizing decisions and the impact of g

Price Discrimination and Deadweight Loss

A monopolist that charges a single uniform price faces deadweight loss due to higher pricing. Now su

Price Discrimination in Monopolistic Competition with a Negative Externality

A firm in a monopolistically competitive market practices price discrimination while generating a mi

Price Discrimination with Externalities in the Telecommunications Market

A large telecommunications firm that practices price discrimination also imposes negative externalit

Price Elasticity and Price Discrimination Strategies

Analyze how variations in price elasticity of demand enable firms to engage in third-degree price di

Product Differentiation in Monopolistic Competition

Product differentiation is a key feature of monopolistic competition. Analyze how differentiation af

Production Costs in Innovative Apparels

Innovative Apparels operates in an imperfectly competitive market and uses skilled labor to produce

Production Function Evaluation in a Mobile App Firm

A mobile app development firm operates in an imperfectly competitive market. The firm has a fixed co

Profit Maximization in Virtual Reality Experiences

A virtual reality (VR) experience firm operates in an imperfectly competitive market. The firm has a

Short-run and Long-run Outcomes in Monopolistic Competition

A firm operating in a monopolistically competitive industry experiences short-run profits due to a d

Strategic Interaction in Oligopoly

Two firms in an oligopolistic market must choose between two strategies: 'High' and 'Low' pricing. T

Taxation and Innovation in Telecommunications

In the telecommunications market, rapid innovation is key. A $4 per‐unit tax is imposed on firms in

Taxation in a Market with Economies of Scale: High-Tech Gadgets

High-tech gadgets are produced in a market where economies of scale are present, and the competitive

Third-Degree Price Discrimination and Welfare Effects

A monopolist can practice third-degree price discrimination by segmenting the market into two groups

Analysis of Derived Demand Curve Shifts

This question requires you to analyze shifts in the derived demand curve for labor and to explain ho

Analysis of Monopsony: Wage Determination and Employment

In a monopsonistic labor market, a single employer has the power to set wages. Consider the followin

Analysis of Per-Unit Tax in a Competitive Labor Market

Consider a competitive market for labor in which firms hire workers where the marginal revenue produ

Analysis of Productivity Changes on Factor Demand

This question examines the effect of increased labor productivity on the firm’s derived demand for l

Analyzing Derived Demand for Labor in a Competitive Market

A firm hires workers in a perfectly competitive labor market. Derived from the demand for its final

Analyzing Diminishing Marginal Returns and Factor Demand

Firms often experience diminishing marginal returns as more of a variable input is employed. Explain

Calculation of Marginal Revenue Product and Marginal Factor Cost

This question involves analyzing a firm’s employment decision by calculating the marginal product of

Comparative Analysis of Labor and Capital Markets

A firm must decide between hiring additional labor or investing in capital. Consider that product de

Comparative Statics: Factor Price Increases and Labor Demand

Assume that a firm's demand for labor is derived from its product market. Analyze how an increase in

Comparative Statics: Impact of Rising Capital Price on Input Choice

A rise in the price of capital forces a firm to re-evaluate its input combination. Analyze this effe

Derived Demand for Capital Analysis

Consider a firm that rents capital for production. The marginal product of capital is given by $$MPK

Effect of Wage Changes on Labor Hiring Decisions

This question focuses on how changes in the wage rate affect the hiring decisions of a firm operatin

Effects of Binding Minimum Wage on Labor Market Dynamics

In a competitive labor market, the government imposes a binding minimum wage above the equilibrium w

Effects of Technological Innovation on Factor Productivity

A firm adopts new technology that increases its marginal product of labor. Initially, $$MPL(L) = 15

Effects of Unionization on Labor Costs and Employment

This question discusses how unionization affects labor markets, particularly through changes in marg

Effects of Universal Basic Income on Labor Supply

A government introduces a universal basic income (UBI), which provides a fixed income to all citizen

Evaluating Factor Markets Under Uncertainty

This question examines how uncertainty regarding future product demand affects a firm's hiring decis

Externalities in Agriculture: Overuse of Fertilizers

Excessive fertilizer use in agriculture leads to nutrient runoff that damages aquatic ecosystems. An

Factor Market Equilibrium and Derived Demand Analysis

Consider a perfectly competitive labor market in which firms base their hiring decisions on the marg

Factor Market Equilibrium under a Binding Wage Subsidy

This question examines the impact of a government wage subsidy on the equilibrium in the labor marke

Factor Supply Shifts: Effects on Employment and Wages

This question evaluates the impact of an increase in labor supply, due to a rise in the number of qu

Factors Affecting Labor Supply and Demand

List and describe three determinants of labor demand and three determinants of labor supply. (a) For

Government Intervention and Factor Market Outcomes

A government policy imposes a binding minimum wage in the labor market. The following table summariz

Government Intervention in Labor Markets

Evaluate the impact of government intervention in labor markets through subsidies and analyze their

Government Intervention: Tax on Hiring in Labor Markets

The government imposes a per-worker tax of $4 on firms in a competitive labor market. Analyze how th

Graphical Analysis of Factor Market Equilibrium

A firm collects data on wages and employment to analyze its labor market. Using the provided data se

Graphing the Effect of a Per-Worker Subsidy in the Labor Market

To promote employment, the government provides a per-worker subsidy of $5 to firms. Evaluate the imp

Impact of a Wage Subsidy on Factor Market Outcomes

The government introduces a wage subsidy for low-income workers, effectively reducing the cost of la

Impact of External Shocks on Labor Demand

A technological innovation in a production process increases worker productivity by 20%. Initially,

Impact of Input Price Change on Factor Demand

A firm initially pays $30 per unit for labor and $50 per unit for capital. If the wage rate increase

Impact of Minimum Wage on Competitive Factor Markets

Government intervention in factor markets, such as setting a minimum wage, can alter market outcomes

Impact of Minimum Wage on Factor Markets

In a competitive labor market, assume the initial equilibrium is at a wage of $12 with 200 workers e

Input Substitution Under Changing Relative Factor Prices

This question examines how changes in relative prices affect the firm's input mix for cost minimizat

Labor Market Equilibrium with Derived Demand

This question focuses on deriving equilibrium wage and employment levels from labor supply and deriv

Labor Supply Shifts Due to Immigration

This question explores the effects of an influx of immigrants on the labor market, particularly on l

Least Cost Input Combination Problem

A firm must choose between labor and capital to minimize costs. Use the least cost rule to determine

Least Cost Input Mix Determination

A firm uses labor and capital to produce output with marginal products given by $$MPL = 40 - 2*L$$ a

Least Cost Rule and Factor Choice

A firm uses both labor and capital in production. It faces input prices of $$P_{L} = 15$$ and $$P_{K

Long-Run Adjustments in Factor Markets due to Entry and Exit

Over the long run, the entry and exit of firms in a product market affect the derived demand for lab

Manufacturing and Community Health

A local manufacturing plant produces goods but its production generates hazardous waste that adverse

Marginal Factor Cost and Hiring Decisions in Labor Markets

Understanding marginal factor cost (MFC) is critical for a firm’s hiring decision, especially in mar

Marginal Factor Cost Explanation

Define marginal factor cost (MFC) and explain its role in firms’ hiring decisions in a perfectly com

Marginal Productivity Analysis

A firm has the following marginal product (MP) schedule. The product price is $30. | Workers | MP |

Marginal Revenue Product Calculation

A manufacturing firm produces gadgets and employs workers whose productivity is shown in the table b

Minimum Wage Effects in Different Market Structures

Evaluate how an imposed minimum wage affects factor markets in both competitive and monopsonistic se

Monopsonistic Labor Market Analysis

Examine the characteristics of a monopsonistic labor market and determine the profit-maximizing hiri

Monopsonistic Labor Market Analysis

In a monopsonistic labor market, a single employer faces an upward sloping labor supply curve. Suppo

Negative Externalities in Tech Manufacturing

A semiconductor manufacturing plant generates hazardous waste that contaminates local water supplies

Negative Externality in Fast Food Production

A fast food chain's production process generates excessive waste that contributes to local pollution

Off-Farm Employment and Farm Labor Supply

Analyze how off-farm employment opportunities impact the labor supply available to the agricultural

Optimal Factor Combination under Budget Constraints

A firm produces output using labor and capital according to the production function $$Q = 2*L^{0.4}*

Profit Maximization in Multi-Factor Production

A smartphone manufacturing company has the production function $$Q = L^{0.5} * K^{0.5}$$. The sellin

Profit Maximization under Technological Change

This question explores how technological change affects a firm’s production decisions, specifically

Technological Advancements and Factor Market Decisions

A firm adopts new technology that increases its marginal product of labor. Initially, MPL is 7; afte

The Role of Marginal Factor Cost in Employer Hiring Decisions

This question examines how a firm evaluates the marginal factor cost (MFC) when hiring under an upwa

Understanding Factor Markets and Derived Demand

Define 'Factor Markets' and 'Derived Demand'. (a) Provide concise definitions for each term. (b) Ill

Wage Differentials and Human Capital

Examine the factors contributing to wage differentials between skilled and unskilled labor, and anal

Wage Discrimination and Monopsony

This question examines the concept of wage discrimination within monopsonistic labor markets and its

Allocation of Resources and Social Welfare in a Perfectly Competitive Market

Consider a small market for apples with the demand function $$P = 20 - 0.5*Q$$ and the supply functi

Allocative Efficiency and Deadweight Loss

Using a market for Good X, analyze the conditions for social efficiency and identify any inefficienc

Analyzing Negative Externalities and Corrective Tax

Consider a market where production causes a negative externality, leading to a divergence between th

Antibiotic Overuse and External Costs: Addressing Resistance

The overuse of antibiotics in healthcare can lead to antibiotic resistance, a negative externality t

Carbon Tax and Environmental Externalities

This FRQ analyzes how a carbon tax can correct the market failure from negative environmental extern

Comparative Policy Analysis: Tax vs Subsidy vs Regulation

Policymakers have several tools to correct market failures due to externalities. Compare the effects

Comparing Per-Unit and Lump-Sum Taxes in Different Market Structures

This FRQ compares the effects of per-unit and lump-sum taxes on a firm operating in a monopolistic c

Comparing Subsidy and Tax Approaches to Externality Correction

Governments use both taxes and subsidies to correct market externalities. Compare these two approach

Cost-Benefit Analysis of an Environmental Regulation

A government regulation requires factories to install pollution filters at a cost of $$30$$ per unit

Determining Socially Efficient Output in a Market with Negative Externalities

This FRQ focuses on evaluating social efficiency in the presence of negative externalities. Consider

Effects of Price Floors on Market Efficiency

Analyze the impact of imposing a price floor in a perfectly competitive market.

Evaluating Regulation’s Impact on Market Structure

Examine how non-price regulations, such as environmental standards, can impact market outcomes in a

External Costs in Chemical Production

A chemical production facility emits pollutants that contaminate a nearby water source, representing

FRQ 5: Comparison of Per Unit Tax and Lump Sum Tax

Analyze the differences between a per unit tax and a lump sum tax in a perfectly competitive market.

FRQ 12: Impact of Price Ceilings on Housing Markets

Analyze how a government-imposed price ceiling affects the housing market. Assess the changes in con

Government Intervention in a Labor Market: Minimum Wage Effects

This FRQ explores the effects of imposing a minimum wage in a labor market. Using the graph provided

Government Subsidy to Address a Positive Externality in Education

This FRQ examines how a per-student subsidy can correct an underprovided positive externality, such

Internalizing Externalities Through the Coase Theorem

Discuss the Coase Theorem as an alternative to government intervention in addressing externalities.

Internalizing Positive Externalities via Subsidies

In a market with positive externalities, the private marginal benefit (MB) is lower than the social

Interpreting the Lorenz Curve and Gini Coefficient for Income Inequality

A country’s income distribution is depicted by the Lorenz curve in the accompanying graph. Answer th

Market Failure from Asymmetric Information

Asymmetric information can lead to market failure in various industries. Answer the following:

Market Power, Monopolies, and Antitrust Policy

Consider a monopolistic firm operating in the market for Good Z, where its market power leads to dev

Measuring Income Inequality: The Lorenz Curve and Gini Coefficient

Analyze income inequality by constructing a Lorenz curve and calculating the Gini coefficient using

Minimum Wage Effects: Labor Market Analysis

Analyze the impact of a government-imposed minimum wage (a price floor in the labor market) using th

Minimum Wage Policy and Labor Market Equilibrium

Analyze the effects of imposing a minimum wage above the market equilibrium on the labor market. Con

Minimum Wage Policy in Labor Markets

A minimum wage policy acts as a price floor in the labor market. Analyze its impact on employment an

Negative Externality in Water Pollution from Irrigation

Excessive fertilizer use in irrigation can lead to water pollution, a negative externality affecting

Positive Externalities and Subsidy Policy

This FRQ examines how positive externalities lead to underproduction in a market, and it evaluates t

Positive Externality in Renewable Energy Investment

Investment in renewable energy not only reduces fossil fuel use but also provides broad environmenta

Price Floors and Their Effects on Surpluses

Examine the impact of implementing a price floor in a perfectly competitive market. Discuss how it a

Progressive Taxation and Income Redistribution

Examine the effects of implementing progressive taxation on income distribution and inequality.

Public Goods and the Free Rider Problem

This FRQ focuses on the characteristics of public goods and the implications of the free rider probl

Public Goods and the Free-Rider Problem in National Defense

Public goods like national defense are often underprovided in free markets due to the free‐rider pro

Public Transfers and Labor Market Incentives

Examine how public transfer programs influence labor market outcomes and incentives.

Taxation Effects on a Firm's Cost Structure: Per-Unit vs. Lump-Sum Tax

A firm operating in a perfectly competitive market faces typical cost curves. Government policy is c