UNIT 2 Microeconomics SHORT FREE-RESPONSE SAMPLE QUESTIONS Sample Short Free-Response Questions 1. Evaluate this statement: “An increase in demand increases price. The higher price increases supply. The higher supply decreases price, and price settles down to the original level.” 2. If foreigners demand more American wheat, what will happen to the price and quantity supplied in the momentary situation? In the short run? In the long run? Why? 3. I sit in the back row of the barbers’ union where they are discussing a proposal to raise the price of haircuts from $18 to $20. The argument gets nowhere, and someone suggests asking me, as an economist, whether it is a good idea or not. I reply, “Many studies have shown that the demand for haircuts is elastic.” What are they to make of this? Why? Be as brief as possible in making the major point that the barbers ought to see in this situation. Advanced Placement Economics Microeconomics: Student Activities © National Council on Economic Education, New York, N.Y. 117 UNIT 2 Microeconomics SHORT FREE-RESPONSE SAMPLE QUESTIONS (continued) 4. True, false or uncertain, and explain why? “Other things being the same, the surplus of workers associated with a price floor will be greater the greater the elasticity of both supply and demand.” Discuss this statement. Use graphs to illustrate your explanation. PRICE S $5.00 D 40,000 QUANTITY OF TICKETS *5. An arena holds a maximum of 40,000 people, as indicated in the graph above. Each year the circus holds eight performances, all of which are sold out. (A) Analyze the effect on each of the following of the addition of a fantastic new death-defying trapeze act that increases the demand for tickets. (i) The price of tickets (ii) The quantity of tickets sold * Actual free-response question from a past AP test. Reprinted by permission of the College Entrance Examination Board, the copyright owner. For limited use by NCEE. 118 Advanced Placement Economics Microeconomics: Student Activities © National Council on Economic Education, New York, N.Y. UNIT 2 Microeconomics SHORT FREE-RESPONSE SAMPLE QUESTIONS (continued) (B) The city of Toledo institutes an effective price ceiling on tickets. Explain where the price ceiling would be set. Explain the impact of the ceiling on each of the following: (i) The quantity of tickets demanded (ii) The quantity of tickets supplied (C) Will everyone who attends the circus pay the ceiling price set by the city of Toledo? Why or why not? 6. A newspaper headline says, “The Coldest Winter in 20 Years Brings Record Prices for Heating Oil.” (A) Using a graph of home heating oil, show and explain how price changed. (B) What other factors could cause the price of heating oil to increase? Advanced Placement Economics Microeconomics: Student Activities © National Council on Economic Education, New York, N.Y. 119 UNIT 2 Microeconomics SHORT FREE-RESPONSE SAMPLE QUESTIONS (continued) 7. In a recent year, the price of wheat fell. For each of the following, draw a supply and demand graph showing a decrease in prices with the stated impact on quantity. (A) The quantity of wheat decreasing (B) The quantity of wheat increasing (C) The quantity of wheat staying the same 120 Advanced Placement Economics Microeconomics: Student Activities © National Council on Economic Education, New York, N.Y. UNIT 2 Microeconomics SHORT FREE-RESPONSE SAMPLE QUESTIONS (continued) 8. The market for many commodities is seasonal in nature. Their sales (equilibrium quantity) increase dramatically during certain times of the year. Christmas cards and fresh strawberries, at least in the North, are two examples. Christmas-card sales increase during the last three months of the year, and the sales of fresh strawberries in the North increase during the summer months. But the (equilibrium) price movement of these two commodities is quite different during their peak sales season: Christmas cards increase in price during the last three months of the year, whereas strawberries decrease in price during the summer. (A) Show on the graph below how there can be an increase in the equilibrium quantity and an increase in the equilibrium price of Christmas cards during the last three months of the year, and briefly explain what has happened. Christmas Card Market PRICE S P D Q QUANTITY (B) Change the graph for fresh strawberries in the North to show how there can be an increase in the equilibrium quantity and a decrease in the equilibrium price of strawberries in the summer, and briefly explain what has happened. Strawberry Market in the North PRICE S P D Q QUANTITY Advanced Placement Economics Microeconomics: Student Activities © National Council on Economic Education, New York, N.Y. 121
