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AP Microeconomics: Sample FRQs

1. Question:

Market Structures and Pricing
Suppose a local coffee shop operates in a monopolistic competition market structure. In your response, be sure to:

  • Define monopolistic competition and explain its key characteristics.
  • Analyze how the coffee shop determines its price and output in the short run and long run.
  • Discuss the potential inefficiencies associated with monopolistic competition and how they compare to perfect competition.

Response Guidelines:

  • Define monopolistic competition as a market structure characterized by many firms offering differentiated products, ease of entry and exit, and some degree of market power for each firm.
  • In the short run, firms in monopolistic competition will produce where marginal cost equals marginal revenue, determining the price and output at that point. In the long run, firms will enter the market if profits exist, driving prices down until firms make zero economic profit.
  • Discuss inefficiencies such as deadweight loss and the excess capacity in monopolistic competition, and compare these inefficiencies to the more efficient outcomes in perfect competition, where firms produce at the lowest possible cost.

2. Question:

Price Elasticity of Demand and Total Revenue
A car dealership is considering raising the price of a specific model of car. In your response, be sure to:

  • Define price elasticity of demand and explain how it is calculated.
  • Analyze how the price elasticity of demand for this car model affects the dealership's total revenue if the price is increased.
  • Discuss factors that could influence the price elasticity of demand for this car.

Response Guidelines:

  • Define price elasticity of demand as the percentage change in quantity demanded divided by the percentage change in price, and explain how to calculate it.
  • If demand is elastic, increasing the price will reduce total revenue, while if demand is inelastic, increasing the price will increase total revenue.
  • Discuss factors affecting elasticity, such as the availability of substitutes, whether the good is a necessity or luxury, the proportion of a consumer’s budget spent on the good, and time horizon (whether consumers have time to adjust to price changes).

3. Question:

Cost Structures in Perfect Competition
In a perfectly competitive market, firms produce at a level of output where price equals marginal cost. In your response, be sure to:

  • Explain the characteristics of a perfectly competitive market.
  • Analyze how a firm in perfect competition determines its output level in the short run.
  • Discuss the long-run adjustments that occur in a perfectly competitive market and how they affect the firm’s profit.

Response Guidelines:

  • Define the key characteristics of a perfectly competitive market: many firms, homogeneous products, free entry and exit, and price-taking behavior.
  • In the short run, firms in perfect competition will produce at the output level where price equals marginal cost (P = MC). They maximize profit by producing where marginal cost equals marginal revenue (MC = MR).
  • In the long run, if firms are earning economic profits, new firms will enter the market, increasing supply and lowering the price until firms earn zero economic profit. If firms are incurring losses, some firms will exit the market, reducing supply and increasing the price until remaining firms break even.

Grading Rubric for AP Microeconomics FRQs

The AP Microeconomics FRQs are graded on a scale of 0-9, with the rubric focusing on clarity, accuracy, and the application of economic principles to real-world scenarios.

Monopolistic Competition and Pricing (0-6 points)

  • 0-1 points: The response demonstrates little to no understanding of monopolistic competition or fails to address the pricing and output decisions in the short run and long run.
  • 2 points: The response explains the basic characteristics of monopolistic competition but provides an incomplete or unclear analysis of price and output decisions in the short and long run.
  • 3 points: The response explains monopolistic competition and addresses price and output in the short run but lacks full detail in the long-run analysis or inefficiencies.
  • 4 points: The response provides a solid explanation of monopolistic competition and covers price and output decisions in both the short and long run, discussing inefficiencies.
  • 5 points: The response demonstrates a thorough understanding of monopolistic competition, providing a clear and detailed explanation of price and output decisions in both time frames and a discussion of inefficiencies.
  • 6 points: The response is comprehensive and sophisticated, accurately explaining monopolistic competition and thoroughly analyzing price, output, and inefficiencies in both the short and long run with a well-supported comparison to perfect competition.

Price Elasticity of Demand and Total Revenue (0-6 points)

  • 0-1 points: The response demonstrates minimal understanding of price elasticity or its effect on total revenue.
  • 2 points: The response defines price elasticity but may not fully analyze the effect on total revenue or lacks details in its explanation.
  • 3 points: The response explains price elasticity and provides some analysis of its effect on total revenue, but it may not include enough detail or cover all aspects.
  • 4 points: The response clearly explains the relationship between price elasticity and total revenue and provides a solid analysis of how price increases affect revenue.
  • 5 points: The response provides a thorough and detailed analysis of price elasticity and its effect on total revenue, addressing all relevant factors.
  • 6 points: The response demonstrates a deep and comprehensive understanding of price elasticity and revenue, offering a nuanced explanation and discussing multiple influencing factors.

Cost Structures in Perfect Competition (0-6 points)

  • 0-1 points: The response provides little or no explanation of perfect competition or how firms determine output in the short run.
  • 2 points: The response provides a basic understanding of perfect competition but lacks detail in explaining output determination or long-run adjustments.
  • 3 points: The response covers perfect competition and output determination but may not fully explain long-run adjustments or the firm’s profit in the long run.
  • 4 points: The response offers a solid explanation of perfect competition, output determination in the short run, and long-run adjustments, but may lack full analysis of firm profits.
  • 5 points: The response thoroughly explains perfect competition, short-run output decisions, and long-run adjustments, with a detailed discussion of firm profit.
  • 6 points: The response demonstrates a sophisticated understanding of perfect competition, providing an in-depth analysis of short-run output, long-run adjustments, and the effect on profits.

Sample Grading Breakdown (for one FRQ)

  • Monopolistic Competition and Pricing: 5 points
  • Price Elasticity of Demand and Total Revenue: 6 points
  • Cost Structures in Perfect Competition: 5 points
  • Total: 16 points (for all three FRQs combined)

These sample FRQs assess key concepts in AP Microeconomics, including market structures, price elasticity, and cost structures in perfect competition. Let me know if you need more questions or further clarification!