AP Microeconomics FRQ Room

Comparative Advantage and Trade

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

Comparative Advantage and Trade Decision

Analyze comparative advantage using given production data for two countries and discuss the gains fr

Comparative Advantage in International Trade

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

Cost-Benefit Analysis of a Public Policy Initiative

Perform a cost-benefit analysis for a proposed public infrastructure project, identifying explicit a

Cost-Benefit Analysis: Implicit and Explicit Costs

This question explores the distinction between explicit and implicit costs using cost-benefit analys

Economic Systems and Resource Allocation

This question examines the differences among economic systems and their methods of resource allocati

Economic Systems and Resource Allocation

Compare different economic systems in terms of how they allocate resources and address the three fun

Evaluating the Impact of Governmental Subsidies

This question focuses on how a government subsidy affects market equilibrium and economic welfare.

FRQ 1: Scarcity and Opportunity Cost

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

FRQ 13: Market Failures – Externalities and Public Goods

This question explores market failures by examining negative externalities and the provision of publ

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 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 Scarcity on Innovation: A Case Study

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

Integrative Analysis: Economic Concepts in Business Decision-Making

This integrative question requires you to apply several economic concepts—scarcity, opportunity cost

Interpreting Costs in a Business Venture

This question deals with the identification and evaluation of implicit and explicit costs in a busin

Marginal Product and Diminishing Returns

This question focuses on the concept of marginal product of labor and diminishing returns. Answer ev

Market Equilibrium and the Impact of Taxes

This question examines market equilibrium and the effects of a per-unit tax on Good X. Answer all pa

Micro vs. Macroeconomics Perspectives

This question requires you to contrast the scope and analysis of microeconomics and macroeconomics.

Opportunity Cost in Education vs. Work Decisions

Evaluate the concept of opportunity cost in the context of choosing between full-time work and highe

Optimal Consumption Rule and Budget Allocation

Analyze consumer choice by applying the optimal consumption rule to determine efficient budget alloc

Positive vs. Normative Economics

This question deals with distinguishing between positive and normative economics. Answer each part c

Positive vs. Normative Economics

This question explores the differences between positive and normative economic analysis.

Price Elasticity of Demand Calculation

This question tests your ability to compute and interpret both own-price elasticity and cross-price

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).

Resource Allocation in a Mixed Economic System

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

Resource Scarcity and Market Outcomes

A key input in electronics manufacturing, such as rare earth metals, experiences global scarcity due

Scarcity and Household Budget Allocation

Analyze how scarcity influences household budgeting decisions and discuss trade-offs using a given m

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 in Resource Allocation

Discuss the concepts of scarcity and opportunity cost in the context of personal budgeting. Consider

Specialization, Comparative Advantage and Terms of Trade

This question analyzes the benefits of specialization along with the concepts of comparative advanta

Supply and Demand and Scarcity

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

Supply and Demand: Scarcity and Resource Allocation

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

Trade-offs Between Productive Efficiency and Allocative Efficiency

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

Trade-offs in Government Policy Decision

Analyze the concept of trade-offs in government budget allocation using cost-benefit analysis.

Trade-offs in Resource Allocation Decisions

A small business owner must decide between investing in new technology, expected to increase product

Analyzing a Price Ceiling in the Fast Food Market

In response to public pressure on food prices, a city imposes a price ceiling of $6 on fast food, wh

Analyzing Diminishing Marginal Utility and Demand

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

Analyzing Market Dynamics through Price Elasticities and Surplus Loss

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

Basic Demand Analysis

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

Combined Analysis of Supply, Demand, and Government Intervention: Price Ceiling Case Study

In a rental housing market, the original equilibrium rental price is $$\$800$$ and the equilibrium q

Consumer and Producer Surplus Analysis with Demand and Supply Shifts

Examine how a change in market conditions, such as a shift in demand or supply, affects consumer and

Deadweight Loss from Market Interventions

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

Deadweight Loss in a Quota-Constrained Market

A government imposes an import quota on a particular good, reducing the quantity traded from its equ

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

Effects of a Price Ceiling in the Gasoline Market

In an effort to make gasoline more affordable, a government imposes a price ceiling at $2.80 per gal

Effects of a Price Ceiling in the Textbook Market

A public university implements a price ceiling of $80 on textbooks to make them more affordable. Pre

Effects of a Price Floor in the Furniture Market

A government sets a price floor of $250 on furniture in a market currently in equilibrium at $200 wi

Evaluating the Impact of Tariffs on Domestic Markets

A domestic market for imported cars has a demand given by $$P = 50 - 0.5Q$$ and a world supply that

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 3: Determining Market Equilibrium, Consumer and Producer Surplus

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

FRQ 5: Consumer and Producer Surplus Calculation

Consider a market where the demand function is $$D: P = 200 - 2*Q$$ and the supply function is $$S:

FRQ 8: Analyzing Simultaneous Shifts in Demand and Supply

Consider the market for electric scooters. Due to technological improvements, the supply curve shift

FRQ 10: Cross Price Elasticity of Demand between Coffee and Tea

In a local market, data shows that the quantity demanded of coffee is influenced by changes in the p

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 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: 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 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 18: Variable Elasticity Across Price Ranges

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

Impact of Government-Imposed Price Ceiling in the Residential Rental Market

A government has imposed a price ceiling in the residential rental market aimed to keep rents afford

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 Price Ceilings on Markets

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

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

Industrial Pollution in the Chemical Market

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

International Trade: Tariffs and Quotas Impact

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

Law of Diminishing Marginal Utility and the Demand Curve

Discuss how the law of diminishing marginal utility contributes to the downward-sloping nature of th

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 Equilibrium, Consumer and Producer Surplus

This question focuses on understanding market equilibrium and the calculation of consumer and produc

Market Shifts due to External Shocks

This question examines how external shocks, such as increases in raw material costs, shift the suppl

Negative Externality in Industrial Fishing

Overfishing not only depletes fish stocks but also causes negative external impacts such as by-catch

Pollution from Inter-City Bus Services

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

Supply Analysis and Shifters

This question focuses on the law of supply and factors that shift the supply curve. Answer the follo

Supply Shocks: Effects of a Technological Improvement

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

Tax Incidence and Deadweight Loss in a Competitive Market

Consider a market with demand $$P = 90 - Q$$ and supply $$P = 30 + Q$$. A tax of $$\$10$$ per unit i

Urban Congestion from Ride-Hailing Services

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

Accounting vs. Economic Profit Analysis

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

Adjustment to Increased Capital Rental Rate

A firm uses both capital and labor in its production. The rental rate for capital increases from $10

Analysis of Long-Run Production Costs

Discuss the long-run production cost structure of a firm, focusing on the concepts of economies of s

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 the Production Function and Marginal Returns

A firm produces widgets using labor as its only variable input. The table below shows the labor inpu

Cost Functions and Marginal Cost Curve Calculation

A firm’s total cost function is given by $$TC(Q) = 5*Q + 3*Q^2 + 40$$. Analyze the cost structure ba

Cost Optimization with Fixed and Variable Inputs

A firm incurs a fixed cost of $$500$$ and experiences decreasing variable cost per unit as output in

Deriving the Firm's Supply Curve from its MC Curve

Demonstrate how a firm's marginal cost (MC) curve forms the basis for its supply curve in a perfectl

Economic and Accounting Profit Calculation

A firm has the following financial data for a given period as shown in the table below. Use this dat

Economic vs. Accounting Profit with Implicit Costs

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

Effects of Scale on Long-Run Production Costs

A firm’s long-run average total cost (LRATC) is represented by the function $$LRATC = 100 + \frac{20

Efficiency Losses from Government Price Floors

A government imposes a price floor in the market for Good Y, resulting in a surplus. (a) Draw a gr

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

FRQ 1: Production Function and Diminishing Marginal Returns Analysis

A company uses labor as its only variable input in the production process. The table below shows the

FRQ 2: Short-Run Production Cost Analysis

A firm operates in the short run with a fixed cost (FC) of $200. Its variable cost (VC) function is

FRQ 3: Long-Run Production Costs: Economies and Diseconomies of Scale

Company XYZ is reviewing its long-run production costs. The firm’s long-run average total cost (LRAT

FRQ 4: Entry and Exit Decisions – Short Run vs. Long Run

A firm faces a daily fixed cost of $100 and variable costs of $5 per unit produced. Part A: Explain

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 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 11: Short-Run vs. Long-Run Production Decisions

A firm operates with a total cost function given by $$TC(Q) = 50 + 6 * Q + 0.5 * Q^2$$. Due to a dro

FRQ 18: Analyzing Returns to Scale

Understanding returns to scale is essential in analyzing long-run production. Part A: Differentiate

FRQ 18: Cost Metrics Comparison: Average and Marginal Costs

A firm produces gadgets and has a total cost function described by $$TC(Q) = 200 + 4 * Q + 0.2 * Q^2

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

Graphing Average and Marginal Cost Curves

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

Graphing Production and Cost Curves

A firm’s cost curves are presented in the graph provided. Analyze the diagram and answer the followi

Industry Supply and Firm’s Cost Structure

An industry consists of 10 identical firms, each with a cost function $$TC(Q) = Q^2 + 40$$. The mark

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 Entry and Exit Decisions in Perfect Competition

In a perfectly competitive market, firms can enter or exit based on profit conditions. Suppose a fir

Long-Run Production Costs: Economies and Diseconomies of Scale

A firm’s long-run average total cost (LRATC) behavior is summarized in the table below: | Output (Q

Managerial Decision-Making: Cost Minimization

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

Marginal Analysis and Optimal Output

A competitive firm faces a market price of $15 per unit. Its total cost function is given by $$TC(Q)

Marginal Cost and Marginal Product Relationship

A manufacturing firm has a marginal product of labor (MPL) given by the function $$MPL = 30 - 2*L$$

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

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

Profit Calculation: Accounting vs Economic Profit

A firm reports total revenue of $1,000 and explicit costs of $600. If the opportunity cost of the fi

Profit Types and Profit Maximization

A firm sells its product at $$50$$ per unit. In a given period, the firm incurs explicit costs of $$

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 Production Costs Analysis

A firm operating in the short run has a total cost (TC) function given by $$TC(Q) = 100 + 20*Q + 2*Q

Short-Run vs. Long-Run Cost Curves Comparative Analysis

A firm has several short-run average total cost (ATC) curves corresponding to different plant sizes.

Short-run vs. Long-run Production Decisions

An electronics manufacturer experiences an unexpected surge in demand. Initially, some inputs are fi

Short-Run vs. Long-Run Strategic Decisions in Perfect Competition

A firm in a perfectly competitive market faces a short-run total cost function of $$TC = 200 + 10*Q

Analyzing Efficiency Costs of Monopoly Market Power

Market power in a monopoly often leads to efficiency losses. Evaluate these losses by analyzing allo

Assessing Cost Structures in Handmade Jewelry

A handmade jewelry business operates in an imperfectly competitive market. The firm has a fixed cost

Barriers to Entry and Market Dynamics in Imperfect Competition

Discuss the role of barriers to entry in imperfectly competitive markets and analyze their impact on

Barriers to Entry and Market Outcomes

Analyze the impact of barriers to entry on market structure and firm behavior in imperfectly competi

Collusion and Cartel Formation in Oligopolistic Markets

This question explores how collusion and cartel formation can influence market outcomes in an oligop

Collusion and Profit Sharing in an Oligopoly Cartel

In an oligopolistic market, firms form a cartel to maximize joint profits by acting like a monopoly.

Comparative Analysis of Allocative Efficiency in Market Structures

Allocative efficiency occurs when price equals marginal cost. Compare how perfectly competitive, mon

Comparative Analysis of Elasticities: Monopoly vs. Monopolistic Competition

In this question, you will compare the price elasticity of demand for a monopolist versus a firm in

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 and Revenue Analysis in Monopolistic Competition

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

Cost Curves and Inefficiencies in Imperfect Competition

Explore the role of cost curves in determining output decisions and the resulting inefficiencies in

Cost Evaluation for Craft Clothing Co.

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

Demand and Pricing Strategies in Imperfect Markets

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

Environmental Externality in Energy Production

An energy firm in an imperfectly competitive market generates negative externalities through polluti

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 17: Sustainability of Collusion in Oligopolies

Firms in an oligopoly may attempt to collude to maximize joint profits. However, sustaining collusio

Game Theory in Oligopolies: Prisoner's Dilemma

Analyze the Prisoner’s Dilemma in the context of duopolistic competition and its implications for co

Government Intervention in Luxury Smartphone Accessories Market

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

Government Intervention in Monopoly Markets

Analyze the effects of government-imposed price controls on monopolistic markets.

Government Regulation of Natural Monopolies

This question explores the existence of natural monopolies and examines government interventions aim

Impact of Price Discrimination under Per‐Unit Tax

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

Impacts of Price Wars in Oligopolistic Markets

Price wars in oligopolistic markets can have significant short-run and long-run effects. Analyze the

Labor and Production at Gourmet Coffee

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

Long-Run Adjustments in Monopolistic Competition

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

Marginal Returns in a Craft Brewery

A craft brewery operates in an imperfectly competitive market. It has a fixed cost of $350, pays a w

Market Concentration and Collusion in Oligopolies

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

Market Dynamics in Monopolistic Competition

Describe the process by which monopolistic competition shifts from short-run profit to long-run norm

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 Entry and Exit in Monopolistic Competition

Discuss the dynamics of market entry and exit in monopolistic competition and their effects on long-

Market Structure and Innovation: Trade-offs in Product Variety

Different market structures influence the incentives for innovation and product diversity. Analyze t

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

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

Natural Monopoly and Government Regulation

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

Natural Monopoly: Pricing and Regulation

Analyze the formation and pricing behavior of natural monopolies and the effect of government regula

Negative Externality in Chemical Production

A chemical production firm in an imperfectly competitive market incurs negative externalities due to

Price Discrimination Analysis

Analyze the concept of price discrimination and its impact on market outcomes.

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

Product Differentiation in Monopolistic Competition

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

Taxation and Innovation in Telecommunications

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

Taxation and Price Discrimination in the Software Industry

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

Adjustments to Rising Labor Costs: Firm's Response

Investigate how a firm adjusts its hiring decision in response to an increase in wages in a competit

Analysis of Derived Demand Curve Shifts

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

Analyzing Derived Demand in Response to Changes in Final Product Markets

An increase in the price of the final product can lead to a higher derived demand for labor. Examine

Analyzing the Effects of a Tax on Labor Employment

A government tax on each worker hired increases the costs for firms. Analyze the impact of such a ta

Analyzing the Impact of Capital Price Changes on Production Decisions

Examine how a change in the price of capital affects a firm’s production decisions and its optimal i

Comparative Analysis: Perfect Competition vs. Monopsony in Factor Markets

This question examines the differences in hiring decisions and wage determinations between competiti

Comparative Factor Pricing: Changes in Input Prices

A firm employs both labor and capital. Initially, the prices are $$P_L = 10$$ and $$P_K = 20$$, with

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 and MRP Calculation

This question examines the concept of derived demand and the computation of marginal revenue product

Derived Demand for Labor

Examine the concept of derived demand for labor by deriving the Marginal Revenue Product (MRP) funct

Derived Demand for Labor: Analyzing MRP and Optimal Hiring

This question examines a firm's derived labor demand based on its marginal revenue product (MRP) fun

Disruption in Labor Supply Due to a Natural Disaster

A sudden natural disaster disrupts the local labor market, leading to a temporary leftward shift in

Economic Profit and Zero Profit in Long-Run

A firm operating in a perfectly competitive factor market is earning short-run economic profit. (a)

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 Demographic Changes on Labor Supply

In a regional economy, demographic changes lead to a decrease in the labor supply. Assess the impact

Effects of Legal Interventions on Labor Market Costs

New safety regulations increase the cost of hiring labor for firms. Answer the following:

Equilibrium in Perfectly Competitive Factor Markets

Consider a competitive labor market where firms hire workers until $$MRP = MFC$$. The table below pr

Evaluating Factor Markets Under Uncertainty

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

Evaluating Wage Differentiation in Skilled vs. Unskilled Labor Markets

This question analyzes the employment of skilled and unskilled labor using their respective marginal

Externalities in Agriculture: Overuse of Fertilizers

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

Factor Endowments and Comparative Advantage in International Trade

This question links factor markets to international trade by analyzing national differences in facto

Factor Market Equilibrium under Demand and Supply Shifts

A new government policy increases the minimum wage, while at the same time an innovation boosts work

Government Intervention in Labor Markets

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

Graphical Analysis of Factor Market Equilibrium

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

Impact of Automation on Derived Demand for Labor

A manufacturing firm adopts automated technology, which reduces the need for labor. Prior to automat

Impact of Derived Demand Shock from Increased Product Price

A smartphone manufacturer experiences an increase in the final product price from $$P = 400$$ to $$P

Impact of Increased Productivity on Labor Demand

A technological breakthrough increases worker productivity in an industry. Analyze the effect of thi

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

Impact of Technological Improvement on Derived Demand

A firm upgrades its technology, which improves the productivity of labor. Initially, at a given leve

Impact of Wage Change on Factor Substitution

A firm uses both labor and capital in production. Initially, the cost minimizing input combination s

Influence of Immigration on the Factor Market

This question considers the effects of increased immigration on the labor supply and overall market

Long-Run Adjustments in Factor Markets

Firms can adjust all factors of production in the long run. This question examines the differences b

Marginal Factor Cost and Derived Demand Calculation

A firm's marginal product of labor is given by $$MPL = 50 - 0.5*Q$$, its product sells at a price of

Marginal Factor Cost Explanation

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

Monopsonistic Labor Market Analysis

Consider a monopsonistic labor market where a single employer faces an upward-sloping labor supply a

Monopsonistic Labor Market Analysis

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

Monopsonistic Labor Market Analysis

In a monopsonistic labor market, a single employer determines both the wage rate and employment leve

Monopsonistic Labor Market Analysis

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

Negative Externalities in Tech Manufacturing

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

Negative Externality in Mining Operations

A mining firm’s extraction activities generate dust and noise that reduce nearby property values, ge

Negative Externality in Retail Sector

A new shopping mall development leads to increased traffic congestion and local air pollution, repre

Noise Pollution in Residential Construction

Construction firms in a residential area generate significant noise, creating a negative externality

Output Substitution between Labor and Capital

This question examines the least cost rule and the substitution between labor and capital by compari

Production Function Analysis and Cost Measures

A firm uses labor to produce output. A portion of its production and cost data is provided below. An

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 Perfectly Competitive Factor Markets

A firm operating in a perfectly competitive labor market hires workers until its marginal revenue pr

Profit Maximizing Behavior in Perfectly Competitive Factor Markets

A firm operating in a perfectly competitive labor market faces a constant wage rate of $20 per hour.

Technological Change and Factor Demand

A technological innovation increases labor productivity in a manufacturing firm. Analyze the impact

Temporary Surge in Derived Demand for Labor

A firm experiences a temporary surge in product demand, causing its marginal revenue product for lab

Wage Rigidity, Unemployment, and Factor Markets

Wage rigidity, arising from long-term contracts and minimum wage laws, can lead to unemployment in t

Welfare Implications of Monopsonistic Labor Markets

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

Allocative Efficiency and Market Outcomes in a Competitive Market

Consider a market for Good X operating under perfect competition. Allocative efficiency is achieved

Analyzing the Impact of Subsidies on Equilibrium in a Monopolistically Competitive Market

This FRQ investigates the effect of a per-unit subsidy on equilibrium outcomes in a monopolistically

Comparative Analysis of Government Interventions in Externality Markets

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

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

Correcting Monopoly Externalities Through Taxation

A monopolist operates in a market where a negative externality causes the social marginal cost to ex

Correcting Negative Consumption Externalities with Taxes

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

Cost-Benefit Analysis in Regulatory Policy

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

Cost-Benefit Analysis of an Environmental Regulation

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

Determining Elasticities and Their Policy Implications in Retail Markets

This FRQ requires the calculation of own-price and cross-price elasticities for retail products and

Dynamic Analysis of Externality Correction over Time

Over time, technological innovations can reduce the external cost associated with a negative externa

Effects of Price Floors on Market Efficiency

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

Evaluating Market Failure Through External Costs

Discuss a market failure arising from negative externalities, using a real-world example to support

FRQ 1: Graphing the Impact of a Per Unit Tax on Market Efficiency

Analyze the impact of a per unit tax on a competitive market for Good X. In this problem, you will d

FRQ 3: Correcting a Positive Externality with a Subsidy in the Education Market

In the market for education services, positive externalities result in underproduction relative to t

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 10: Government Intervention in Public Goods Markets

Public goods are often under-provided due to the free rider problem. Analyze the role of government

FRQ 14: Government Intervention in R&D Markets

The market for research and development (R&D) exhibits positive externalities, often resulting in un

FRQ 17: Anti-Trust Policies and Market Efficiency

Analyze how anti-trust policies can improve market efficiency by reducing market power.

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 Intervention in a Monopolistic Market

A monopolistic firm is subject to government intervention in the form of a price ceiling. Analyze th

Long Run Effects of Government Subsidies on Market Structure

An industry receives government subsidies in the short run. Over time, these subsidies may alter mar

Minimum Wage Laws in Monopsonistic Labor Markets

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

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

Positive Externalities and Subsidies Impact

Analyze how positive externalities lead to market underproduction and explain how government subsidi

Positive Externalities and Subsidy Policy

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

Price Ceiling Impact on a Competitive Market

Consider a perfectly competitive market where the supply function is given by $$P = 25 + Q$$ and the

Price Floor in Agricultural Markets

The government has implemented a binding price floor to support wheat farmers' incomes. Analyze the

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.

Promoting Positive Externalities with Subsidies

In the market for higher education, positive externalities lead to a divergence between private and

Public Health and Government Subsidy Analysis

Analyze the impact of a per unit subsidy on the market for vaccinations. The market is described by

Regulatory Intervention versus Taxation in Externality Reduction

In some markets, governments can adopt different interventions to address negative externalities. Co

Regulatory Measures and Pollution Spillovers

Industrial pollution can generate spillover effects that harm nearby communities. Consider the follo

Social Efficiency in Labor Markets

Analyze the concept of social efficiency in the labor market by discussing how the equilibrium wage

Subsidy Impact Analysis in Markets with Positive Externalities

Analyze the impact of a per unit subsidy in a market that experiences positive externalities.

Tax Burden Distribution in a Competitive Market

Analyze how the burden of a per-unit tax is distributed between buyers and sellers in a competitive

Tax Incidence in Monopolistic Competition

This FRQ evaluates the effects of a per unit tax on a monopolistically competitive firm. Consider a

The Dynamics of Income Distribution: Lorenz Curve Analysis

Examine how the Lorenz curve represents income distribution and inequality. Explain what deviations

The Impact of Minimum Wage Laws on Employment and Inequality

Analyze the effects of a binding minimum wage on the labor market for low-skilled workers. Assume th