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The 2013
AP Microeconomics Exams
Dave Anderson
Centre College, Chief Reader
Agenda
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Confidential and Proprietary –
Not for Distribution
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
Exams
54,000 U.S. Exams
12,000 International Exams
2,000 Alternate Exams
Mean / Standard Deviation / Max
1. Monopoly
2. Game Theory / Oligopoly
3. Market Failure
5.57
2.55
2.82
2.72
1.62
1.60
10
5
6
Scores
5
4
3
2
1
2013
16.7%
28.4%
20.6%
15.4%
18.9%
Scores
5
4
3
2
1
2013
16.7%
28.4%
20.6%
15.4%
18.9%
2012
14.8%
28.3%
21.8%
16.3%
18.8%
2011
14.6%
25.9%
21.6%
16.0%
21.9%
Students Did Great On
• Monopoly Graph
– Profit Max Quantity where MR = MC (88%)
– Price on Demand Curve above Q* (86%)
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%)
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%)
Most Common Errors
AP Microeconomics
2013
Overview of Trouble Spots
8. Quantity with Price
Discrimination
7. QE < QS 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
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.
8. Micro 1 (b)(i)
Answer: Q3.
39.6% answered correctly
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.
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
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.
6. Micro 3 (b)(ii) Answer:
MSC
Price
($)
Supply
PE
Demand = MSB
QE
Quantity
(35.6% answered correctly)
6. Micro 3 (b)(ii) Alternative Answer:
Price
($)
Supply
= MSC
PE
Demand
MSB
QE
Quantity
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
PieCrust
Advertise
Not Advertise
Advertise
$250, $200
$450, $300
Not Advertise
$180, $500
$390, $400
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
PieCrust
Advertise
Not Advertise
Advertise
$250, $200
$450, $300
Not Advertise
$180, $500
$390, $400
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
PieCrust
Advertise
Not Advertise
Advertise
$250, $200
$450, $300
Not Advertise
$180, $500
$390, $400
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
PieCrust
Advertise
Not Advertise
Advertise
$250, $200
$450, $300
Not Advertise
$180, $500
$390, $400
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
PieCrust
Advertise
Not Advertise
Advertise
$250, $200
$450, $300
Not Advertise
$180, $500
$390, $400
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
PieCrust
Advertise
Not Advertise
Advertise
$250, $200
$450, $300
Not Advertise
$180, $500
$390, $400
32.4% Answered Correctly
4. Micro 1 (e)
Question: Is point f
in the elastic
inelastic, or unit
elastic portion of
the demand
curve? Explain.
Price
Elastic Range
Inelastic range
Demand
0
Price
Quantity
Marginal
Revenue
Total
Revenue
0
Quantity
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
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
PieCrust
Advertise
Not Advertise
Advertise
$250, $200
$450, $300
Not Advertise
$180, $500
$390, $400
3. Micro 2 (b)(ii)
La Pizza
PieCrust
Advertise
Not Advertise
Advertise
$250, $200
$450, $300
Not Advertise
$180, $500
$390, $400
3. Micro 2 (b)(ii)
La Pizza
PieCrust
Advertise
Not Advertise
Advertise
$250, $200
$450, $300
Not Advertise
$180, $500
$390, $400
3. Micro 2 (b)(ii)
La Pizza
PieCrust
Advertise
Not Advertise
Advertise
$250, $200
$450, $300
Not Advertise
$180, $500
$390, $400
3. Micro 2 (b)(ii)
La Pizza
PieCrust
Advertise
Not Advertise
Advertise
$250, $200
$450, $300
Not Advertise
$180, $500
$390, $400
3. Micro
2 (b)(ii)
La Pizza
PieCrust
Advertise
Not Advertise
Advertise
$250, $200
$450, $300
Not Advertise
$180, $500
$390, $400
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 > $400.
3. Micro 2 (b)(ii)
30.4% Answered Correctly
2. Micro 1 (b)(ii)
Question: Now
assume that the
monopolist can
perfectly price
discriminate.
Using the labeling
on the graph,
identify the total
revenue of the
monopolist.
Answer: P4fQ30.
19.7% Answered Correctly
1. Micro 3 (b)(iii)
Question: Assume that noise from the
fireworks disturbs all of the neighbors. On
your graph from part (a), show each of the
following.
(iii) The deadweight loss, if any, shaded
completely.
Price
($)
Supply
PE
Demand
QE
Quantity
MSC
Price
($)
Supply
PE
Demand = MSB
QE
Quantity
MSC
Price
($)
Supply
PE
Demand = MSB
QE
Quantity
16.2% Answered Correctly
(credit was given for consistency with an incorrect
answer in an earlier part of the question)