AP Microeconomics:
Relay Race
The following activity will be split into 3 legs: 1.) perfectly competitive markets/firms,
2.) imperfectly competitive firms, and 3.) factor markets.
All answers will be recorded on the answer key provided in class.
In order to move onto the next leg, students must have their answers checked off by Mr.
Davey.
The first team to complete all 3 legs of the race will be crowned the champions and have
the right to 3 extra credit points on our final assessment of the year.
S
Leg 1: Perfectly Competitive
Markets/Firms
Go on to the next slide.
Question 1:
P
MC
P
S
ATC
AVC
P1
P1
D
Q1
Q
MR=D
Q2
Q3 Q4
What is the firm’s profit maximizing output?
Q5
Q6 Q7
Q
Question 2:
P
MC
P
S
ATC
AVC
P1
P1
D
Q1
Q
MR=D
Q2
Q3 Q4
Q6 Q7
Q
Q5
What happens to the market’s price and the firm’s profit in the
long-run?
Question 3:
P
P
S
P3 P
2
P1
P1
P5
D
Q1
MC
P4
P6
.... .
.
.
.
A
C
B
D
ATC
AVC
MR=D
E
G
F
Q
Q
Q2 Q3Q4
Q5
(Select one) This firm is currently experiencing profits/losses.
The area of profits/losses are _____________________ (use points/prices above)
Question 4:
(Choose One) Between the
prices of $9 and $11, is the
demand for corn relatively
elastic, relatively inelastic,
unit elastic, perfectly elastic,
or perfectly inelastic.
EXPLAIN USING
SPECIFIC VALUES.
Question 5:
If the government estabilshes
a price floor at $11, how much
corn will be purchased by
consumers?
Question 6:
Suppose the government
guarantees a market price of
$11 buy purchasing all of the
surplus corn. How much corn
will the government need to
purchase?
Question 7:
Suppose the government
successfully markets corn as an
export.
i.
How could successfully
marketing corn achieve an
equilibrium price of $11?
ii. Calculate producer surplus if
corn is successfully marketed
as an export.
Question 8:
Identify the area that
represents the net gain
from trade.
Question 9:
Identify the quantity
imported by this
domestic economy. .
Question 10:
i.
What is the value of the
excise tax?
ii. What is the amount of tax
revenue created from the
tax?
iii. What is the area
representing deadweight
loss?
End of Leg I.
Please have Mr. Davey check
your answers up to this point.
If correct: move on to next leg of relay.
If incorrect: go back and try again!
Leg II.
Imperfectly Competitive Firms.
8 Questions.
Go on to the next slide.
Question 1:
i.
What is the profit maximizing
quantity?
ii. What price will the monopolist
charge?
iii. Identify the fair return quantity.
Question 2:
Assume the monopoly is a firstdegree price discriminator:
i.
Identify the area of total
revenue for the monopolist.
ii. Identify the area of
consumer surplus.
Question 3:
Identify the following points for
the monopolist:
i. Socially optimal quantity.
ii. Allocatively efficient
quantity.
iii. Fair return price.
Question 4:
A monopolistically competitive firm at a short-run equilibrium.
(Choose One) The firm illustrated above is experiencing economic gains/losses in
the short-run.
Question 5:
A monopolistically competitive firm at a short-run equilibrium.
Fill in the blanks:
In the long run, the demand for this firms output will ______________________
and the firms will have an economic profit of __________________________.
Question 6:
i. What is the dominant strategy, if any, in the payoff matrix above?
ii. What are the profits of the Nash equilibrium?
Question 7:
i. In what market structure do these 2 firms operate?
ii. If these firms could collude, what actions would each
firm take?
Question 8:
i.
Identify the productively
efficient point.
ii. Identify the value of
excess capacity.
A
P2
B
P3
C
Q 2 Q3
End of Leg II.
Please have Mr. Davey check
your answers up to this point.
If correct: move on to next leg of relay.
If incorrect: go back and try again!
Leg III.
Final Leg!!!
Factor Markets. 5 Questions.
Go on to the next slide.
Question 1:
Use a set of side-by-side graphs illustrate a perfectly competitive labor
market and a firm hiring labor from the perfectly competitive labor
market.
i. Identify wage rate in the labor market (W), MRP, and MRC.
Question 2:
Illustrate a monopsonist’s labor market.
i. Identify the profit maximizing quantity of labor (Q) and the wage
the monopsonist will pay its employees (W)
Question 3:
i. Identify the profit maximizing quantity of workers for Leadmill Co.
ii. If wage rate decreased to $6/hr, how many workers would Leadmill
Co. hire?
Question 4:
Perfectly Competitive
Labor Market
Wage
SL = MRC
WE
QE
DL = MRP
QL
Suppose the demand for the
output the firm is selling
increases.
i. How does the value of MRP
change: increase, decrease,
or stay the same?
ii. How does the quantity of
workers hired in the labor
market change: increase,
decrease, or stay the same?
Question 5:
MR
C
Wage
SL
Identify the quantity of workers
hired under the following market
conditions for the monopsonist:
i. Profit maximizing quantity.
ii. Perfectly competitive quantity.
iii. Suppose the government
imposed a minimum wage at
W2. What quantity of workers
would the firm hire?
W4
W3
W2
W1
D = MRP
Q1
Q2 Q3 Q4
QL
Congratulations!!!
You have completed the first annual AP Micro Relay Race…
Please take your answer sheet to Mr. Davey to check your
answers and to see if you have won the race.
Once all answers have been checked you should start your
homework for tonight:
FRQ Packet #s 3 & 4