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The Graph (not required for part c)
The Graph (not required for part c)
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Top 10 AP Econ Mistakes

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1Top 10 AP Econ Mistakes. 2008. 127. Micro 2 (b). Question: Should Mandy
2Overview. 11. Compare MSC, MSB 10. Tax purchase more fudge and less coffee,
? ?MC ? ?Q 9. Foreign Exchange Market with purchase more coffee and less fudge, or
Shift 8. Automatic Stabilizers 7. Optimal maintain her current consumption? Explain.
Consumption Rule 6. Number of Firms Can’t Fudge. Coffee. Quantity. 10 lbs. 7 lbs.
Increase in SR. 5. Currency Appreciation Price per lb. $2. $4. MU of last lb. 12.
from Real Interest Rate ? 4. Current 20.
Account Changes Resulting from Real Income 13Answer: Mandy should purchase more
Changes 3. Link between Growth and Capital fudge and less coffee because the MU/$ of
2. Elements of the Current and Capital fudge (6) is greater than the MU/$ of
Account 1. Effects of a Lump Sum Subsidy. coffee (5). 44% said more fudge 26% gave
311. Overseas Micro 2 (b). Question: the correct reason.
[In a competitive market for vaccinations, 146. Micro 1 (b) iii. Question: Indicate
which benefit consumers as well as others the effect the lump-sum subsidy to firms
…] Is marginal social cost greater than, would have on the number of firms in the
less than, or equal to marginal social industry in the short run. Answer: No
benefit at the market output? Answer: MSC effect. (The number of firms won’t
< MSB 32% Answered correctly. increase in the short run.) 25 percent
4The Graph (not required for part b). answered correctly.
$/unit. S = MSC. MSB. D. Qmarket. Quantity 155. Overseas Macro 1 (d) ii. Question:
of Vaccinations. Given the [increase] in the real interest
510. Overseas Micro 2 (c). Question: rate in part (c), what will be the effect
How will a tax on producers of the on the value of Z’s currency? Answer: Z’s
vaccines affect the deadweight loss that currency will increase in value (because
you identified in part (a) (iii)? Explain. the higher real interest rate attracts
Answer: Deadweight loss increases (64 more financial investment in Z, thus
percent answered correctly) because the increasing the demand for Z’s currency and
tax increases costs and causes output of decreasing the supply). 23% answered
the vaccine to fall. (31% percent answered correctly.
correctly). 164. Macro 2 (b). Question: How would an
6The Graph (not required for part c). increase in the real income of the United
$/unit. $/unit. MC. S. ATC. SMB. D. Q1. States affect the U.S. current account
Qs. Quantity. Quantity. balance? Explain. Answer: The current
7The Graph (not required for part c). account balance will decrease or move
MC + T. S + T. $/unit. $/unit. MC. S. ATC toward a deficit (15 percent answered
+ T. ATC. SMB. D. Q2. Q1. Qs. Quantity. correctly) because the increase in real
Quantity. income causes imports to increase relative
8The Graph (not required for part c). S to exports. (33 percent answered
after exit. MC + T. S + T. $/unit. $/unit. correctly).
MC. S. ATC + T. ATC. SMB. D. Q3. Q2. Q1. 173. Macro 1 (e). Question: How will the
Qs. Quantity. Quantity. real interest rate [increase] in part (d)
99. Macro 2 (c). Question: Using a affect the growth rate of the U.S.
correctly labeled graph of the foreign economy? Answer: The growth rate will fall
exchange market for the U.S. dollar, show (49 percent answered correctly) because a
how an increase in U.S. firms’ direct higher real interest rate discourages
investment in India will affect the value investment and as a result, capital
of the dollar relative to the rupee. formation will decrease. (12 percent
Answer: In the dollar market, the supply answered correctly).
of dollars will increase as dollars are 182. Macro 2 (a) ii. Question: Two major
exchanged for rupees, shifting the dollar subaccounts in the balance of payments
supply curve to the right and decreasing accounts are the current account and the
the value of the dollar. 33% drew the capital account. In which of these
graph correctly 29% shifted S correctly. subaccounts will the following be
10The Graph. rupees/dollar. Supply. New recorded? (ii) A U.S. manufacturer buys
Supply. e. e’. Demand. Q. Q’. Quantity of computer equipment from Japan. Answer:
Dollars. Current Account 10 percent answered
118. Macro 1 (b). Question: [Starting correctly.
with a balanced budget] What is the impact 191. Micro 1 (b) i. Question: Indicate
of the recession on the federal budget? the effect the lump-sum subsidy to all
Answer: There will be a deficit because apple growers would have on a particular
government spending / transfer payments firm’s quantity of output in the short
increase and/or taxes fall due to run. Explain. Answer: The lump-sum subsidy
automatic stabilizers (for example, will have no effect on the firm’s quantity
unemployment insurance). Discretionary of output in the short run (23 percent
fiscal or monetary policy not accepted, answered correctly) because it does not
for such answers violate the ceteris affect MC or MR, which determine the
paribus assumption. 81% correctly quantity of output. 9 percent answered
indicated a deficit 27% indicated correctly.
awareness of automatic stabilizers.
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Top 10 AP Econ Mistakes

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