1. The 2013 AP Microeconomics Exams Dave Anderson Centre College, Chief Reader

2. Confidential and Proprietary – Not for Distribution Agenda

3. Microeconomics Committee Chair Pamela M. Schmitt, United States Naval Academy Michael A. Brody, Menlo School Committee Members Joyce Jacobsen, Wesleyan University Margaret Ray, Mary Washington College Dee Mecham, The Bishop’s School Sandra K. Wright, Adlai E. Stevenson High School College Board Advisor Mary Kohelis, Brooke High School Chief Reader David Anderson, Centre College ETS Assessment Specialists Fekru Debebe Hwanwei Zhao Marwa Hassan

4. Exams 54,000 U.S. Exams 12,000 International Exams 2,000 Alternate Exams

5. Mean / Standard Deviation / Max 1.Monopoly5.572.7210 2.Game Theory / Oligopoly2.551.625 3.Market Failure2.821.606

8. Scores 2013 516.7% 428.4% 320.6% 215.4% 118.9%

9. Scores 2012 14.8% 28.3% 21.8% 16.3% 18.8% 2011 14.6% 25.9% 21.6% 16.0% 21.9% 2013 516.7% 428.4% 320.6% 215.4% 118.9%

10. Students Did Great On Monopoly Graph –Profit Max Quantity where MR = MC (88%) –Price on Demand Curve above Q* (86%)

11. Students Did Great On Monopoly Graph –Profit Max Quantity where MR = MC (88%) –Price on Demand Curve above Q* (86%) Market Equilibrium –Price and quantity found at intersection of Supply and Demand (88%)

12. Students Did Great On Monopoly Graph –Profit Max Quantity where MR = MC (88%) –Price on Demand Curve above Q* (86%) Market Equilibrium –Price and quantity found at intersection of Supply and Demand (88%) Game Theory –Best strategy given other player’s move (73%)

13. Most Common Errors AP Microeconomics 2013

14. Overview of Trouble Spots 8. Quantity with Price Discrimination 7. Q E < Q S for Positive Externality 6. Relationship between MSB and D 5. Nash Equilibrium Outcomes 4. Determination of Inelastic Demand 3. Why No Dominant Strategy? 2. Show Total Revenue with Price Discrimination 1.Show Deadweight Loss on graph

15. 8. Micro 1 (b)(i) Question: Now assume that the monopolist can perfectly price discriminate. Using the labeling on the graph, identify the quantity produced.

16. 8. Micro 1 (b)(i) Answer: Q 3. 39.6% answered correctly

17. 7. Micro 3 (c)(i) Question: Now instead assume that all of the neighbors enjoy watching fireworks. In this case, is the market equilibrium quantity of fireworks greater than, less than, or equal to the socially optimal quantity? Explain.

18. 7. Micro 3 (c)(i) Answer: The market equilibrium quantity is less than the socially optimal quantity because the fireworks generate a positive externality. OR because MSB > MPB. OR because MSB > MSC at the market quantity. 38.4% answered correctly

19. 6. Micro 3 (b)(ii) Question: Assume that noise from the fireworks disturbs all of the neighbors. On your graph from part (a), show each of the following. (b) (ii) The marginal social benefit curve, labeled MSB.

20. (35.6% answered correctly) 6. Micro 3 (b)(ii) Answer: Supply PEPE Quantity Price ($) MSC Demand = MSB QEQE

21. 6. Micro 3 (b)(ii) Alternative Answer : Supply = MSC PEPE Quantity Price ($) MSB Demand QEQE

22. 5. Micro 2 (c)(i & ii) Question: In the Nash Equilibrium, determine each of the following. (i)PieCrust’s daily profit (ii)LaPizza’s daily profit La Pizza Advertise Not Advertise PieCrustAdvertise$250, $200$450, $300 Not Advertise $180, $500$390, $400

23. 5. Micro 2 (c)(i & ii) Question: In the Nash Equilibrium, determine each of the following. (i)PieCrust’s daily profit (ii)LaPizza’s daily profit La Pizza Advertise Not Advertise PieCrustAdvertise$250, $200$450, $300 Not Advertise $180, $500$390, $400

24. 5. Micro 2 (c)(i & ii) Question: In the Nash Equilibrium, determine each of the following. (i)PieCrust’s daily profit (ii)LaPizza’s daily profit La Pizza Advertise Not Advertise PieCrustAdvertise$250, $200$450, $300 Not Advertise $180, $500$390, $400

25. 5. Micro 2 (c)(i & ii) Question: In the Nash Equilibrium, determine each of the following. (i)PieCrust’s daily profit (ii)LaPizza’s daily profit La Pizza Advertise Not Advertise PieCrustAdvertise$250, $200$450, $300 Not Advertise $180, $500$390, $400

26. 5. Micro 2 (c)(i & ii) Question: In the Nash Equilibrium, determine each of the following. (i)PieCrust’s daily profit (ii)LaPizza’s daily profit La Pizza Advertise Not Advertise PieCrustAdvertise$250, $200$450, $300 Not Advertise $180, $500$390, $400

27. 5. Micro 2 (c)(i & ii) Answer: In the Nash Equilibrium: (i)PieCrust’s daily profit is $450 (ii)LaPizza’s daily profit is $300 La Pizza Advertise Not Advertise PieCrustAdvertise$250, $200$450, $300 Not Advertise $180, $500$390, $400 32.4% Answered Correctly

28. 4. Micro 1 (e) Question: Is point f in the elastic inelastic, or unit elastic portion of the demand curve? Explain.

29. Price Quantity Demand 0 Marginal Revenue Inelastic range Elastic Range Price Quantity 0 Total Revenue

30. 4. Micro 1 (e) Answer: Point f is in the inelastic portion of the demand curve because MR is negative OR because TR is falling as Q increases. 32.0% Answered Correctly

31. 3. Micro 2 (b)(ii) Question: What is the dominant strategy, if any, for LaPizza? Explain using the dollar values in the payoff matrix. La Pizza Advertise Not Advertise PieCrustAdvertise$250, $200$450, $300 Not Advertise $180, $500$390, $400

32. 3. Micro 2 (b)(ii) La Pizza Advertise Not Advertise PieCrustAdvertise$250, $200$450, $300 Not Advertise $180, $500$390, $400

33. 3. Micro 2 (b)(ii) La Pizza Advertise Not Advertise PieCrustAdvertise$250, $200$450, $300 Not Advertise $180, $500$390, $400

34. 3. Micro 2 (b)(ii) La Pizza Advertise Not Advertise PieCrustAdvertise$250, $200$450, $300 Not Advertise $180, $500$390, $400

35. 3. Micro 2 (b)(ii) La Pizza Advertise Not Advertise PieCrustAdvertise$250, $200$450, $300 Not Advertise $180, $500$390, $400

36. 3. Micro 2 (b)(ii) LaPizza does not have a dominant strategy because his best choice depends on the strategy chosen by PieCrust. If PieCrust advertises, LaPizza does better by not advertising because the $300 he earns by advertising is larger than the $200 he earns by not advertising. If PieCrust does not advertise, LaPizza does better by advertising: $500 > $400. La Pizza Advertise Not Advertise PieCrustAdvertise$250, $200$450, $300 Not Advertise $180, $500$390, $400

37. 3. Micro 2 (b)(ii) 30.4% Answered Correctly

38. 2. Micro 1 (b)(ii) Question: Now assume that the monopolist can perfectly price discriminate. Using the labeling on the graph, identify the total revenue of the monopolist.

39. Answer: P 4 fQ 3 0. 19.7% Answered Correctly

40. 1. Micro 3 (b)(iii) Question: Assume that noise from the fireworks disturbs all of the neighbors. On your graph from part (a), show each of the following. (iii) The deadweight loss, if any, shaded completely.

41. Supply PEPE Quantity Price ($) Demand QEQE

42. Supply PEPE Quantity Price ($) MSC Demand = MSB QEQE

43. 16.2% Answered Correctly (credit was given for consistency with an incorrect answer in an earlier part of the question) Supply PEPE Quantity Price ($) MSC Demand = MSB QEQE