Tackle the Test: Free-Response Questions

1. Question

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   Rubric for FRQ 1 (10 points)

   769

   

   1 point: Correctly labeled axes (“Price, cost per unit” or “Dollars per unit” on the vertical axis, “Quantity” or “Q” on the horizontal axis)

   1 point: Downward-sloping ATC curve

   1 point: Downward-sloping MC curve below the ATC curve

   1 point: Unregulated quantity Q_U shown on the horizontal axis where MC = MR

   1 point: Unregulated price P_U found on a downward-sloping demand curve above Q_U and shown on the vertical axis

   1 point: Correct profit rectangle

   1 point: Consumer surplus triangle shown below the demand curve and above the price

   1 point: Regulated price and quantity P_R and Q_R shown on the appropriate axes, corresponding to where the demand curve crosses the average total cost curve

   1 point: Consumer surplus will increase

   1 point: Profit will decrease to zero

2. Question

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