CourseCourseConceptConceptDocsDocuments

AP Microeconomics Pol 1 A a Define Forms of Government Price and Quantity Intervention B Explain Using Graphs Where Appropriate How Government Policies Questions

Practise modelling price controls, taxes, subsidies, and government purchases, then calculate their effects on quantities, surplus, public finances, and efficiency.

Syllabus
Effective Fall 2022
Course
AP Microeconomics

Exam points

  • classify a price ceiling or floor as binding and identify the quantity exchanged at the controlled price
  • calculate the shortage under a ceiling or surplus under a floor from quantities demanded and supplied
  • shade or calculate consumer surplus, producer surplus and deadweight loss after a price control
  • calculate government purchases or programme cost when a price-floor authority buys unsold output
  • draw a per-unit tax wedge and identify the buyer price, seller price and reduced market quantity

AP Microeconomics Pol 1 A a Define Forms of Government Price and Quantity Intervention B Explain Using Graphs Where Appropriate How Government Policies Questions question 1

[Maximum number: 3]

Deskward is a typical profit-maximizing firm that produces and sells wooden desks in a constant-cost, perfectly competitive market that is in long-run equilibrium.

Question (a)

(a)

Suppose the government is considering granting a per-unit subsidy to producers of wooden desks. On your market graph in part A, show the short-run effect of a per-unit subsidy on each of the following.

[ 2 ]

Question (i)

(i)

The new market equilibrium price and quantity of wooden desks, labeled P* and Q*, respectively

[ 1 ]

Question (ii)

(ii)

The area representing the total cost of the subsidy to the government, shaded completely

[ 1 ]

Question (b)

(b)

Instead of the per-unit subsidy, suppose the government imposes a binding price floor in the market for wooden desks. Will the price floor result in a shortage of wooden desks, a surplus of wooden desks, or neither? Explain.

[ 1 ]
All question bank results loaded