AP Microeconomics FRQ Room

Advanced Cross-Price Elasticity: Substitutes vs. Complements

Analyze the relationship between two goods by computing the cross-price elasticity of demand.

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 Trade

Evaluate how comparative advantage leads to mutually beneficial trade between entities.

Comparative Advantage and Trade Benefits

This question examines the concepts of absolute advantage and comparative advantage and their role i

Comparative Advantage in International Trade

Two countries, Country X and Country Y, produce only two goods: automobiles and computers. In one ho

Comparative Advantage in Production Decisions

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

Comprehensive Guide to Basic Economic Concepts

This guide provides a complete overview of the foundational economic concepts necessary for understa

Cost-Benefit Analysis of a Public Infrastructure Project

A city is considering investing in a new public transit system. The explicit cost of the project is

Cost-Benefit Analysis of a Public Policy

Apply cost-benefit analysis to evaluate a public infrastructure decision.

Cost-Benefit Analysis: Evaluating Investment Decisions

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

Diminishing Marginal Utility and Returns

Discuss the concepts of diminishing marginal utility and diminishing marginal returns, and provide a

Economic Growth via Technological Advancement

Discuss how technological innovation can drive economic growth and alter the production possibilitie

Evaluating Consumer and Producer Surplus

This question focuses on understanding and calculating consumer and producer surplus, and analyzing

Evaluating Entrepreneurial Investment Decisions Amid Scarcity

Assess how the concept of scarcity and opportunity cost informs an entrepreneur’s decision-making in

Factors of Production Analysis

This question focuses on the factors of production and their impact on economic output and productiv

FRQ 1: Scarcity and Opportunity Cost

This question examines the fundamental economic concepts of scarcity and opportunity cost, and asks

FRQ 2: Production Possibilities Curve (PPC) Analysis

This question focuses on analyzing the Production Possibilities Curve as a means to illustrate oppor

FRQ 5: Factors of Production – Analysis of Resource Allocation

This question addresses the four factors of production and the role they play in resource allocation

FRQ 8: Opportunity Costs in Decision Making

This question requires you to discuss opportunity costs, particularly focusing on business decisions

FRQ 9: Consumer Choice and Marginal Analysis

This question focuses on understanding consumer choice through the lens of marginal utility and the

FRQ 12: Efficiency and Economic Growth via the PPC

This question examines the concepts of productive and allocative efficiency using the Production Pos

FRQ 15: Policy Decision Trade-Offs and Cost-Benefit Analysis

This question focuses on how policymakers use cost-benefit analysis to evaluate trade-offs in public

FRQ 20: Competitive Market Analysis – Cost Curves and Zero Economic Profit

This question integrates multiple concepts by examining a firm's decision-making process in a perfec

Graphical Analysis of Market Shifts due to Resource Scarcity

Analyze how resource scarcity affects market equilibrium using a supply and demand framework.

Microeconomics vs. Macroeconomics: Analyzing Economic Perspectives

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

Opportunity Cost in Daily Decisions

This question examines the concept of opportunity cost in everyday decision-making.

Optimal Consumer Choice Under Budget Constraints

A consumer is deciding how to allocate a $$120$$ budget between Good M and Good N. The marginal util

Positive Analysis Using Economic Data

This question is designed to assess your ability to use positive economic analysis based on empirica

Positive and Normative Economic Analysis

Examine the differences between positive and normative economic analysis using the example of evalua

Price Controls and Market Efficiency

This question examines the effects of price controls on market efficiency, including deadweight loss

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

This question assesses your ability to interpret and analyze a Production Possibilities Curve (PPC).

Production Possibilities Curve and Economic Growth

Analyze the Production Possibilities Curve (PPC) and discuss how economic growth is represented by a

Resource Allocation and Economic Systems Comparison

Analyze different economic systems and how they answer the three fundamental economic questions rega

Resource Allocation Efficiency

This question explores the concepts of productive and allocative efficiency as they relate to resour

Resource Allocation in a Mixed Economic System

Evaluate how a mixed economic system handles resource allocation compared to purely market or centra

Scarcity and Opportunity Cost Analysis

This question examines the concept of scarcity and the idea of opportunity cost in economic decision

Scarcity and Opportunity Cost Analysis

Analyze how the concept of scarcity influences decision-making at both individual and societal level

Scarcity and Opportunity Cost Analysis

Discuss the concept of scarcity as a fundamental economic problem and explain how it forces choices

Supply and Demand and Scarcity

Analyze how the concept of scarcity affects market supply and demand and the resulting equilibrium i

Analyzing Demand Shifts in a Local Market

This question explores the determinants of demand and their impact on the market. Answer the followi

Analyzing Diminishing Marginal Utility and Demand

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

Analyzing Income Elasticity and Market Demand Changes

Examine how changes in income affect market demand by analyzing income elasticity.

Analyzing Market Dynamics through Price Elasticities and Surplus Loss

This question tests your ability to integrate price elasticity calculations with analysis of total r

Analyzing Shifters of Supply: Resource Costs and Technology

A market faces two opposing supply shocks: an increase in resource costs and a simultaneous technolo

Basic Demand Analysis

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

Calculating Price Elasticity of Demand from Data

Using the data provided, analyze the price elasticity of demand for a product.

Changes in Consumer Preferences and Market Equilibrium

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

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 and Income Elasticity

This question examines other elasticities beyond price elasticity: cross price elasticity and income

Cross Price Elasticity and Market Competition

Investigate the relationship between two goods using cross-price elasticity of demand.

Cross Price Elasticity: Identifying Substitutes and Complements

In a certain market, the quantity demanded of Good A changes when the price of Good B alters. Analyz

Cross Price Elasticity: Substitutes vs. Complements

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

Determining Market Equilibrium from Demand and Supply Functions

Consider a market where the demand curve is given by $$P = 100 - Q$$ and the supply curve is $$P = 2

Domestic Market Outcomes under Tariff Policy

Evaluate the impact of an import tariff on a domestic market.

Elasticity of Supply Calculation

This question requires you to calculate the price elasticity of supply and discuss the factors influ

Environmental Externality in Apparel Production

Factories producing apparel sometimes emit pollutants into waterways, imposing an environmental exte

Environmental Impact in Car Manufacturing

Car manufacturing processes often have unaccounted environmental costs due to toxic emissions. In th

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 1: Demand Analysis for Digital Cameras

Consider the following data for the market for digital cameras. Answer the following parts: (a) Usin

FRQ 3: Determining Market Equilibrium, Consumer and Producer Surplus

A market is characterized by the following data: | Price ($) | Quantity Demanded | Quantity Supplied

FRQ 5: Price Elasticity of Supply in the Electronics Market

A manufacturer observes that when the price of an electronic gadget increases from $200 to $240, the

FRQ 9: Analyzing the Effects of a Price Floor in the Wheat Market

Suppose the government imposes a price floor on wheat that is set above the market equilibrium. The

FRQ 11: Analyzing Market Surplus and Adjustments

A certain electronic gadget is sold at a price above its equilibrium level, resulting in a surplus.

FRQ 12: Impact of a Per Unit Tax on Consumer and Producer Surplus in the Soft Drink Market

In a soft drink market, the initial equilibrium is at a price of $2 per unit and a quantity of 1000

FRQ 13: Evaluating the Effects of Tariffs in the Steel Market

The United States imposes a tariff on imported steel. Answer the following: (a) Draw a supply and de

FRQ 14: Long-Run Adjustments in Perfect Competition

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

FRQ 15: Short-Run vs Long-Run Supply Elasticities

Consider a market where the production of a commodity is difficult to adjust in the short-run but ea

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 17: Graphical Interpretation of Market Equilibrium Changes in a New Product Market

A new product enters the market with the following demand and supply functions: $$D_0: P = 200 - 0.5

FRQ 18: Price Elasticity of Demand and its Impact on Total Revenue at a Restaurant

A restaurant lowers the price of a signature dish from $20 to $15, resulting in an increase in quant

FRQ 19: Analyzing Short Run vs. Long Run Supply Elasticity

A producer’s supply of a good is observed over two time periods. In the short run, a price increase

FRQ 20: Impact of Advertising on Market Equilibrium and Surpluses

A firm increases its advertising budget, which shifts the demand curve to the right in the market fo

FRQ 20: Integrated Analysis in the Electric Vehicle Market

Electric vehicles (EVs) have been gaining popularity. Initially, the market demand is given by $$D:

Government Intervention: Price Ceilings and Their Consequences

This question explores how price ceilings affect market outcomes by altering consumer and producer s

Graphical Analysis of Price Floors and Surpluses

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

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

Industrial Pollution in the Chemical Market

A chemical plant produces products in a competitive market, but its production process emits polluta

Long Run vs Short Run Elasticity: Comparative Analysis

This question asks you to compare short-run and long-run price elasticity of supply through definiti

Market Disequilibrium and Adjustment Mechanisms

This question examines the concept of market disequilibrium and how markets adjust to eliminate shor

Market Equilibrium, Consumer and Producer Surplus

Analyze market equilibrium and welfare analysis in a widget market.

Multi-step Analysis of Income and Price Elasticity on Market Revenue

A firm collects the following data: When price rises from $$\$20$$ to $$\$25$$, quantity demanded fa

Price Elasticity of Demand Calculations

This question requires you to calculate the price elasticity of demand using the midpoint formula, i

Supply Elasticity and Producer Behavior

The following table shows data on the quantity supplied of a product at various prices: | Price ($)

Supply Shocks: Effects of a Technological Improvement

A technological advancement reduces production costs in an industry. The initial supply and demand c

Wastewater Contamination in Textile Production

Textile manufacturing can generate wastewater that contaminates local water bodies. In this market,

Water Contamination from Agricultural Pesticide Use

Excessive use of pesticides in agriculture can contaminate water supplies, imposing a negative exter

Accounting vs. Economic Profit Analysis

Examine the differences between accounting profit and economic profit using the provided numerical d

Accounting vs. Economic Profit Analysis

A restaurant owner operates in a competitive market and, over a month, earns a total revenue of $200

Analyzing Diminishing Marginal Returns with Production Data

A firm’s production data is provided in the table below. Analyze the data to answer questions on dim

Calculation of Short-run Production Costs

Examine short-run production costs for a firm using the provided data. Analyze fixed and variable co

Comparative Statics: Changes in Input Prices

A firm’s short-run total cost is given by $$TC = 30 + 6*Q + Q^2$$. Suppose a rise in the wage rate c

Cost Curve Analysis and Graph Interpretation

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

Economic vs. Accounting Profit with Implicit Costs

A firm reports revenue of $$1200$$, explicit costs of $$900$$, and incurs an implicit cost of $$200$

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

Effects of Technological Improvements on Production and Costs

A firm invests in new technology that increases the marginal product of labor by 50% across all leve

FRQ 1: Production Function and Diminishing Marginal Returns

Firm A uses labor as its variable input in production. The table below shows the output produced by

FRQ 5: Economic Profit vs. Accounting Profit

A restaurant generates $1,000 in total revenue in one operating period. Its explicit costs (such as

FRQ 5: Short-Run Shutdown Decision Analysis

A firm faces a fixed cost of $500 and has a variable cost function given by $$VC(Q) = 4 * Q + Q^2$$.

FRQ 7: Exit Rule and Long-Run Equilibrium in Perfect Competition

Firm E is operating at an output level of Q = 100 with an Average Total Cost (ATC) of $18, while the

FRQ 9: Marginal Analysis and Optimal Output Determination

Consider a firm that has a total revenue function and a total cost function as follows: $$TR(Q) = 5

FRQ 11: Cost Minimization in the Long Run

Long-run cost minimization requires firms to choose the combination of inputs that minimizes the tot

FRQ 11: Short Run versus Long Run Decision Analysis

A firm’s short-run total cost function is given by $$TC_{SR}(Q) = 100 + 5*sqrt(Q)$$, while its long-

FRQ 12: Labor Productivity and Marginal Product Analysis

A technology firm employs software developers to fix bugs in its code. The following table shows the

FRQ 14: Impact of Price Controls on Competitive Firms

Government-imposed price controls can affect both consumer and producer surplus in a market. Part A

FRQ 15: Market Adjustments in Perfect Competition

A sudden economic shock has affected the market for Good X in a perfectly competitive industry. The

FRQ 16: Combined Production and Cost Decision in a Competitive Market

Consider a firm with the production function $$Q = 3*L^{0.5}$$. The firm faces a fixed cost of $100

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

FRQ 19: Impact of Increased Wage on Production and Costs

A fast-food chain originally had a variable cost function of $$VC(Q) = 2 * Q + 0.1 * Q^2$$. Due to a

FRQ 19: Profit Analysis with Changing Market Prices

Market prices can have a large impact on a firm’s profitability. Part A: Describe how a change in t

FRQ 20: Cost Function Evolution and Scaling Decisions

A firm’s cost function is given by $$TC(Q) = 200 + 3*Q + 0.5*Q^2$$ and it operates in a perfectly co

Input Costs and Rental Rate Impacts on Production Decisions

A firm uses two inputs, capital (K) and labor (L), with a production function given by $$Q = 2*K + 3

Input Price Changes and Cost Curvature

Analyze the impact of an increase in input prices on a firm's cost curves.

Labor Cost Decisions in a Competitive Market

A firm uses labor as its only variable input. The production data is given in the table below. The w

Labor Productivity and Optimal Hiring Decisions

A firm records the following production data for varying levels of labor input. Use this data to ana

Long‐Run Market Equilibrium and Entry/Exit

In a perfectly competitive market with free entry and exit, firms earn economic profits or losses in

Managerial Decision-Making: Cost Minimization

Analyze how managerial decisions in the short run lead to cost minimization when some inputs are fix

Marginal Product Calculation in Production

Compute the marginal product of labor (MPL) using the data provided and discuss the occurrence of di

Multi-Stage Production Decision and Profit Maximization

A firm operates with a total cost function of $$TC(Q) = 5 + 10*Q + Q^2$$. Answer the following quest

Paper Production and Deforestation Externalities

Paper production can contribute to deforestation, an externality that is not reflected in the firm’s

Production Function Analysis: Marginal Products and Diminishing Returns

Discuss the concept of the production function and describe the relationship between inputs and outp

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

Short-Run Production Cost Analysis: Bakery Cost Curves

A small bakery has fixed costs of $$FC = 50$$ and hires workers at a wage rate of $$w = 15$$ per wor

Short-run Shutdown Decision Analysis

Assess the shutdown decision for a firm in the short run based on its variable costs relative to mar

Short-run Shutdown Decision in Perfect Competition

A firm in a perfectly competitive market is analyzing its short-run operations. The following cost d

Short‐Run Production Costs Analysis

Consider a firm operating in the short run with fixed and variable costs. The following table shows

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

Water Consumption and River Pollution

A market for water-intensive goods is resulting in excessive water use that pollutes local rivers. A

Widget Manufacturing and Air Pollution

A widget manufacturing firm operates in a market that experiences a negative externality from its ai

Collusion and Cartel Behavior in Oligopolies

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

Cost Analysis in Boutique Electronics

A boutique electronics firm operates under imperfect competition. The firm has a fixed cost of $900,

Cost and Revenue Analysis in Monopolistic Competition

Analyze the cost and revenue structure of a firm in monopolistic competition.

Cross-Price Elasticity in Imperfect Competition

This question focuses on the concept of cross-price elasticity and its implications for related good

Demand and Pricing Strategies in Imperfect Markets

Analyze how demand elasticity affects pricing strategies in imperfectly competitive markets.

Dominant Strategy and Nash Equilibrium in Oligopoly

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

FRQ 5: Advertising Effects on Demand Elasticity in Monopolistic Competition

A monopolistically competitive firm launches an advertising campaign aimed at reducing the price ela

FRQ 11: Cost Analysis in Monopolistic Competition

A firm in a monopolistically competitive market faces a fixed cost of $$F = 100$$ and a constant var

Government Intervention in Luxury Smartphone Accessories Market

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

Government Regulation of a Natural Monopoly Market

A water utility company operates as a natural monopoly due to high fixed costs and economies of scal

Impact of Advertising in Monopolistic Competition

Examine the role of advertising in shaping demand and profitability in monopolistic competition.

Impact of Price Discrimination under Per‐Unit Tax

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

Labor and Production at Gourmet Coffee

Gourmet Coffee operates in a market with imperfect competition. The business has a fixed cost of $15

Legal and Economic Barriers to Market Entry

Discuss the various legal and economic barriers to entry in imperfectly competitive markets and thei

Long-Run Adjustments in Monopolistic Competition

In monopolistic competition, firms initially earn economic profits but eventually, market entry erod

Long-run Equilibrium in Monopolistic Competition

Discuss the adjustments that lead to long-run equilibrium in monopolistic competition and the implic

Monopolistic Competition: Short-Run and Long-Run Equilibrium Analysis

This question examines your understanding of monopolistic competition, including the firm’s demand c

Nash Equilibrium Analysis in an Oligopolistic Market

This question explores the concept of Nash equilibrium within an oligopolistic market using a payoff

Natural Monopoly and Government Regulation

Analyze a natural monopoly scenario where significant economies of scale exist, leading to one-firm

Oligopolistic Market Externality in the Airline Industry

In the airline industry, which is characterized by oligopolistic competition, each airline’s operati

Oligopoly and Game Theory: Payoff Matrix Analysis

Examine the concepts of Nash equilibrium and dominant strategies in an oligopolistic market through

Price Discrimination in Monopolistic Competition with a Negative Externality

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

Price Elasticity and Price Discrimination Strategies

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

Price Leadership in Oligopoly

Explore the concept of price leadership in an oligopolistic market and its implications for market o

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

Regulatory Impacts on Monopoly: A Price Ceiling Analysis

Evaluate the effects of imposing a price ceiling on a monopoly and its resulting impact on market ou

Strategic Behavior and Cartel Formation in Oligopolies

Firms in an oligopolistic market sometimes form cartels to maximize joint profits. Analyze the strat

Tax and Advertising in a Monopolistically Competitive Market

In a market where firms engage in heavy advertising to differentiate their products, assume a monopo

Tax Effects in a Monopolistically Competitive Differentiated Goods Market

Consider a market characterized by monopolistic competition where firms sell differentiated products

Taxation and Price Discrimination in the Software Industry

In the software industry, firms often practice price discrimination to capture consumer surplus. Sup

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

Analysis of MRP and MFC in Competitive and Monopsonistic Labor Markets

This question examines the relationship between marginal revenue product (MRP) and the marginal fact

Budget Constraints and Factor Markets

This question integrates isocost and isoquant analysis to determine the cost-minimizing combination

Capital-Labor Substitution in Response to Rising Wages

This question examines how a firm adjusts its mix of capital and labor inputs when faced with an inc

Comparative Analysis: Perfect Competition vs. Monopsony

A table below presents data for a competitive labor market and a monopsonistic market. | Scenario

Comparing Factor Market Outcomes: Monopsony versus Perfect Competition

Consider two distinct labor markets: one that operates under perfect competition and one that is cha

Cost Minimization and Factor Substitution in Production

This question involves applying the least cost rule to determine the optimal combination of labor an

Cost Minimization and the Least Cost Rule

A firm aims to minimize production costs while maintaining its output level by choosing the optimal

Derived Demand Analysis

A coffee shop uses coffee beans as an input to produce coffee beverages. Because the demand for coff

Derived Demand and Marginal Revenue Product Calculation

A firm's marginal product of labor (MPL) is given by $$MPL(Q) = 100 - 2*Q$$ and its product sells at

Derived Demand and Marginal Revenue Product in Factor Markets

A firm’s demand for labor is derived from the demand for its product, and the marginal revenue produ

Diminishing Marginal Returns and Hiring Decisions

A firm experiences diminishing marginal returns to labor as more workers are employed. (a) Explain t

Dynamic Adjustments in Factor Markets

A firm with a production function $$Q = L^{0.6} * K^{0.4}$$ faces dynamic changes in its input marke

Dynamic Factor Demand under Seasonal Demand Shifts

This question analyzes how seasonal fluctuations in product demand affect the firm's derived demand

Efficiency Analysis in Factor Markets with Subsidies

The government introduces a per-worker subsidy to stimulate employment in a slow-growing sector. Ana

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 Markets Under Imperfect Competition: Monopsony Case Study

Examine a monopsonistic labor market and derive the equilibrium conditions. Compare your findings wi

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

Impact of Government Intervention on Labor Supply

This question explores how government policies, such as a minimum wage, affect the labor supply in a

Impact of Immigration on Domestic Labor Supply

A country experiences an inflow of immigrants, which increases the domestic supply of labor. Initial

Impact of Productivity Increases on Labor Demand

A firm experiences a technological innovation that increases worker productivity. Analyze the effect

Impact of Technology on Labor Demand

A firm adopts new technology that increases labor productivity. Analyze the effects of this technolo

Labor Demand Adjustments in an Agricultural Context

This question explores how external factors (e.g., weather conditions) affect labor demand in an agr

Labor Supply and Demand in Competitive Markets

Consider a competitive labor market. Analyze the market equilibrium and the effects of a binding min

Labor Supply and MFC Analysis in a Monopsony

In a monopsonistic labor market, the labor supply curve is given by $$w = 10 + 0.5*L$$ and the margi

Labor Supply Elasticity and Wage Changes

This question tests your understanding of labor supply elasticity and its implications when wages ch

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 and the Least Cost Rule

Firms choose the combination of inputs that minimizes production costs. Using the least cost rule, 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 Competitive Factor Markets

This question requires analysis of the adjustments in a perfectly competitive factor market as new f

Marginal Analysis and Short-run Hiring Decisions

A firm faces diminishing marginal returns with a marginal product of labor described by $$MPL(L) = 2

Marginal Factor Cost Analysis

A firm faces an upward sloping labor supply schedule and must determine its marginal factor cost (MF

Marginal Factor Cost and Hiring Decisions in Monopsony

In a monopsonistic labor market, a firm faces the wage function $$w = 100 + 2*L$$ and its marginal r

Marginal Factor Cost Explanation

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

Marginal Revenue Product Calculation

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

Market Failure and Underemployment in Factor Markets

This question explores the concept of market failure in factor markets, using the example of underem

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

Consider a monopsonistic firm operating in the labor market. The table below shows data on the numbe

Monopsonistic Labor Market Analysis

A single large firm (a monopsonist) operates as the dominant buyer in the labor market. Its labor su

Negative Externality in Oil Refining

An oil refinery produces oil but its refining process emits pollutants that impose additional costs

Negative Externality in Renewable Energy Production

A biofuel production facility, while generating renewable energy, leads to deforestation and loss of

Negative Spillover in Chemical Production

A chemical manufacturing firm produces industrial chemicals but emits harmful substances during prod

Profit Maximization in Factor Markets: Equating MRP and MFC

A firm in a perfectly competitive labor market uses labor as an input. Its production function yield

Profit Maximization in Multi-Factor Production

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

Profit-Maximizing Behavior in Hiring Based on MRP = Wage

A firm operating in a perfectly competitive labor market consults the following table to decide its

Rapid Increase in Product Demand and Derived Labor Demand

A sudden surge in consumer demand for smartphones leads to an immediate increase in the derived dema

Regression Analysis of Labor Demand

This question analyzes the quantitative relationship between labor demand and wage rates using regre

Short-run vs. Long-run Factor Decisions

This question explores the differences between short-run and long-run factor employment decisions, f

Technological Advancements and Factor Market Decisions

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

Technological Change and Factor Market Adjustments

A new technology increases a firm's labor productivity. Initially, the firm's marginal revenue produ

Technological Change and Its Impact on Factor Demand

Consider the impact of a technological improvement that increases the marginal product of labor. Ana

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

Wage Determination: A Case Study

In a small town, a manufacturing plant is the primary employer. Initially, the plant pays workers $1

Welfare Implications of Monopsonistic Labor Markets

Monopsonistic labor markets often result in inefficiencies compared to competitive markets. Analyze

Addressing Underinvestment in Education with Subsidies

Education generates positive externalities leading to underinvestment in the absence of government i

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

Analyzing Positive Externalities and Subsidy Policies

Examine a market where a positive externality exists, causing the marginal social benefit (MSB) to e

Analyzing Price Ceilings in Monopolistic Competition

In a monopolistically competitive market characterized by product differentiation and downward-slopi

Analyzing the Impact of a Progressive Income Tax on Labor Supply

Evaluate how a progressive income tax influences individual labor supply decisions. Consider both th

Antitrust Policies and Market Efficiency Improvement

Antitrust policies are enacted to reduce market power and promote competitive markets. Answer the fo

Carbon Tax and Environmental Externalities

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

Comparative Analysis of Government Interventions in Externality Markets

A manufacturing process creates a significant negative externality due to waste emissions. The gover

Comparative Analysis: Lump-Sum Tax vs. Per-Unit Tax

A competitive firm operates with a total cost function $$TC(Q) = 100 + 3*Q + Q^2$$. Compare the impa

Correcting Negative Consumption Externalities with Taxes

Analyze the impact of a per-unit tax designed to correct a negative consumption externality in a mar

Correcting Negative Externalities in the Cigarette Market

The cigarette market suffers from a negative externality due to adverse health impacts from smoking.

Cost-Benefit Analysis in Regulatory Policy

A government is considering imposing a regulation to reduce harmful emissions from factories. This r

Economic Efficiency vs. Equity: Trade-Offs in Progressive Taxation

Progressive taxation is used to redistribute income and address inequality, but it may also lead to

Evaluating Public Goods Provision: Efficiency and Government Intervention

Discuss the challenges associated with the provision of public goods and how government intervention

Externality from Pesticide Use in Agriculture

Farmers using pesticides may impose external costs on the environment, such as damage to neighboring

FRQ 8: Government Regulation and Non-Price Interventions

Discuss how non-price regulations, such as environmental or safety standards, can be used by the gov

FRQ 11: Comparing Taxation and Subsidies for Negative Externalities

Evaluate the effectiveness of taxes versus subsidies in correcting negative externalities. Compare t

FRQ 13: Minimum Wage in a Monopsony Labor Market

Analyze the effects of imposing a minimum wage in a monopsonistic labor market. Explain how it affec

FRQ 18: Progressive Tax System and Its Effect on Income Distribution

Evaluate the effect of a progressive tax system on income distribution and overall societal welfare.

Government Intervention in External Markets: Case Study Analysis

A city faces significant air pollution from local manufacturing. In response, the government impleme

Graphical Analysis of Social Welfare in a Competitive Market with External Costs

This FRQ requires analysis of social welfare in a competitive market where a negative externality ca

Impact of Lump Sum vs. Per Unit Taxes on Firms

Firms operate under different types of tax regimes. Analyze the effects of a lump sum tax compared t

Market Power and Antitrust Policies

Market power can lead to inefficient market outcomes. Analyze how antitrust policies can improve mar

Minimum Wage Laws in Monopsonistic Labor Markets

In a monopsonistic labor market, a single dominant employer has wage-setting power.

Minimum Wage Policy and Labor Market Equilibrium

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

Negative Externalities and Tax Policy

This FRQ analyzes the inefficient market outcome caused by a negative externality and evaluates how

Positive Externalities and Subsidy Policy

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

Price and Cross-Price Elasticity Analysis in Retail Markets

This FRQ assesses your ability to compute both own-price and cross-price elasticities and interpret

Price Ceiling in the Rental Market

A city implements a binding price ceiling on rental housing to ensure affordability. Analyze the mar

Price Floors and Their Effects on Surpluses

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

Public vs. Private Goods and the Free Rider Problem

Differentiate between public and private goods and explore the inefficiencies caused by the free rid

Public vs. Private Goods and the Free-Rider Problem

Compare and contrast public and private goods, and analyze the free-rider problem associated with pu

Subsidies to Correct Positive Externalities in Agriculture

Consider an agricultural market where organic farming generates positive externalities (e.g., enviro

Underprovision of Public Goods and Government Subsidies

Public goods are often underprovided in free markets due to the free rider problem. Answer the follo