2008 AP Economics!!!

Test Preparation AP Test Preparation
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<p>Alright. I'm pretty good at econ so I think I got a 5 anyways but here is my problem with what i put vs what you guys put for #1:</p>

<p>I agree that ATC shifts downwards. However, MC would not change because a lump-sum subsidy wouldn't affect the marginal unit; MR is determined by industry (firm = price taker) so that doesn't change either. Per-unit subsidies affect MR/MC but lump-sum subsidies and taxes do not because they are independent of quantity (i.e. they ignore the marginal unit and can be treated as a decrease in FC/AFC).</p>

<p>In LR, I disagree that the number of firms decreases. Price decreases, but this price decrease is driven by the entry of new firms who want to make an economic profit. The entry of new firms pushes price down because there is more competition for low-prices. Firms would NOT shut down or leave the industry because they are making less of an economic profit; as long as econ profit is >= 0 and P=MR >= min ATC, it is worth remaining in the industry because the firms' second best opportunity (their implicit cost) is covered.</p>

<p>In my econ class, we did a lot of double shifts at the beginning of the year. Hence I had a short-run supply shift to the right and a long-run supply shift to the right. The short-run supply shift was driven by a decrease in input costs (although it doesn't shift entirely to min ATC because the firm is still left with a SR economic profit in SR). The long-run supply shift was driven, as stated, by an incentive to enter until normal profits are reached.</p>

<p>I didn't study at all for econ b/c I don't get credit but I was 100 percent sure i'm correct about LR and willing to debate about SR...</p>

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<p>In the short runs new firms cannot enter the market, and the number of firms do not change.
In the long run, new firms enter the firm in search of economic profit, until economic profit reaches 0, at which point entry stops.</p>

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<p>I checked my textbook (McConnell/Brue) and it said that the capital account includes the purchase of real or financial assets, mirroring laststopforme's explanation. I would have never expected this to come out in a FRQ...</p>

<p>I found this scoring conversion method that Anarch posted on another thread:
MCAdjusted=MCRight-.25<em>MCWrong
MCAdjusted+(5/3)</em>FRQ1+(5/4)<em>FRQ2+(5/4)</em>FRQ3</p>

<p>71 is usually good enough for a 5 on macro, 73 for micro.</p>

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<p>For macro
I basically have the same answer as UHS Debator....The only question that I was not 100% sure on was the computer equipment thing. Ahh.. I just emailed my teacher, hopefully he will reply soon. That question bothered me so much!!!</p>

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<p>This is what I answered on the Macro:</p>

<p>1)</p>

<p>A- The graph would show point A sliding down the short run Phillips curve to point B.
B- The recession means income decreases, which automatically decreases tax revenue. At the same time more people apply for welfare programs such as TANF increasing government spending through increased transfer payments creating a deficit.
C- Multiplier is 1/.2=5 , so $100 Billion
The tax multiplier is less because people save, and therefore consumption will not equal the same amount as the decrease in taxes. To bridge the recessionary gap the government would have to lower taxes even more, in this case by 25 billion.
D- Government spending can do two things. Either shift the supply curve of the loanable funds market to the left, or shift the demand curve of the loanable fund market to right. Since they did not specify that the government borrowed from the public, I shifted the demand curve to the right. In either case, they both increase the real interest rate.
E- the increase in the real interest rate would decrease the stock of capital, decreasing the rate of economic growth.</p>

<p>2)
A-
Current Account- is part of net exports which is included in the current account.
Capital Account- Considered an foreign investment that is recorded in the capital account.</p>

<p>B- A rise in real income allows Americans to purchase more goods from foreign countries, increasing the demand for foreign currency, and depreciating the dollar. Since the dollar depreciates, foreign countries can buy U.S. products at a better price, increasing net exports and therefore the current account.</p>

<p>C- The investment in India would increase the demand for the rupee and decrease the demand for the Dollar. In the foreign exchange market graph, framed by the dollar price of the rupee in the Y axis and the quantity of dollars in the X axis, the demand for the dollar decreases, depreciating the dollar. </p>

<p>3)</p>

<p>A- Artland will forgo 2 hats for every bicycle. </p>

<p>B- Artland should import bicycles because they most forgo (1/2) a bicycle for every hat, while Rayland only loses (1/4) a bicycle for every hat. By trading with Rayland, Artland can import bicycles at a lower opportunity cost. </p>

<p>C- Rayland would benefit because they would be importing Hats at (1/5) Bicycle for every hat instead of (1/4), and Artland would not because they would be importing Bicycles forgoing 5 hats per bicycle instead of 2. </p>

<p>D- Neither have the comparative advantage because they would both have the same opportunity cost.</p>

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<p>Okay, thanks guys! Maybe I got that part right after all. Barron's made it sound like it was only foreign financial holdings.</p>

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<p>USHdebater that MC adjusted thing for frq makes no sense, because if you get all your pts, then you end up with like a 35 ... and its out of 30.</p>

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<p>^ oops...i didn't check to see if everything matched. it's all i've seen so far though...</p>

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<p><a href="ii">quote</a> If the government implements a per-unit tax of $2 on good R, how much of the tax will the seller pay? The majority ?

[/quote]
</p>

<p>Of course, I never got why the seller didn't just sell it at infinity dollars. I mean, if you can raise it by $2 with impunity, why not just raise it by $9999999 dollars?</p>

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<p>there are elastic and inelastic parts of the curve</p>

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<p>Seeing that the curve is a vertical line....</p>

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<p>its only vertical in the range the question was about. if the price were raised to 1000 dollars, or infinity, demand would become more elastic</p>

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<p>i have a quick question. For that whole callahan's apple orchard question, 1.a. said to draw a graph for each of the following: i. (question here) and ii. (question here.) Then the question goes on to a different section, 1.b. I didn't draw any graphs on my answer sheet for 1.b. because I thought graphs were only required for part 1.a. Was I right? It might help to visit the 2nd page of the following link to see what I mean:
<a href="http://apcentral.collegeboard.com/apc/public/repository/ap08_micro_econ_frq.pdf%5B/url%5D"&gt;http://apcentral.collegeboard.com/apc/public/repository/ap08_micro_econ_frq.pdf&lt;/a&gt;&lt;/p>

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<p>
[quote]
Assume that consumers always buy 20 units of good R each month regardless of its price.

[/quote]
</p>

<p>I don't see where in the curve the demand is elastic. I mean, if you gave elasticity as a formula (as a sort of differential equation) where the slope only starts becoming more horizontal at very high values of price, then I would see where in the curve it would start getting elastic. ;) </p>

<p>(Take a derivative of a constant = always zero ... I don't see where it starts approaching any non-zero value of elasticity for any value of price. ;)) </p>

<p>Of course I was actually just jesting since I know they were using idealised examples to make it easy on us.</p>

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<p>graph only for the first part</p>

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<p>thank god!</p>

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<p>Concerning the equilibrium question ... why would the amount of firms decrease in the long run? There's a decreased profit margin, and economic profit has to be normalised, but the extra firms are basically being artificially held up by the lump sum payment. That's where you get the inefficiency (overallocation).</p>

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<p>Galoisen: your question was "why don't they just sell it at infinity dollars?"</p>

<p>The curve for the firm is perfectly inelastic, but the curve for the industry probably is not. If firms charged exhorbitant amounts for products in the same industry, consumers might just move to a substitute good that's in a different industry. I think that is part of it.</p>

<p>It also helps that perfectly inelastic demand pretty much doesn't exist anywhere LOL.</p>

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<p>^ Although the price elasticities of demand for certain goods approach 0 - emergency medical care for a terminally ill person being a good example</p>

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<p>ehighmark2443 I got kind of lost in your answer lol but I definitely agree on most parts. Can you tell me what your answers were for all 3 AP Micro FRQs?</p>