AP Microeconomics Review Assignment #2 Due:

Chapters 4 – 6

Directions:

I.  Complete the multiple choice just as before. You may type or handwrite the whole question, but you MUST handwrite the complete answer.

  1. Page 51: 1-4
  2. Page 63: 1-5
  3. Page 70: 1-5

II.  Complete the Free Response Questions Below. Do all parts and remember it is not enough to just list your answers, you must explain how you determined those answers. Use properly labeled graphs to assist with you answers.

Free Response

1.  In the United States, textiles are sold in two separate and perfectly competitive markets. The textiles produced in the United States are sold in market A, and imported textiles are sold in market B.

  1. Explain how the supply curve for textiles produced in the United States will be affected by each of the following
  1. A decrease in the number of firms in the United States producing textiles.
  1. An increase in the price of textiles.

Assume that textiles produced in market A and market B are close substitutes

  1. Using one graph for Market A and another for market B, show and explain how a substantial increase in the tariff on textiles imported into the United States will affect each of the following
  1. Equilibrium price and quantity of textiles sold in market B (imported textiles)
  1. Equilibrium price and quantity of textiles sold in market A (textiles produced in the U.S.

#2 is on back!!!

2.  The diagram above illustrates the domestic market for grain in Country X before and after international trade. The letters inside the diagram represent areas, not points.

  1. Using the labeling of the graph, identify each of the following before any trade occurs
  1. Equilibrium Price and quantity
  2. Area of consumer surplus
  3. Area of producer surplus
  1. Using the labeling of the graph, identify the amount of grain that Country X will import if it engages in trade and the world price of grain is at PW.
  1. Now assume that Country X imposes a tariff that raises the price of grain from the free-trade case to PT. Using the labeling of the graph, identify the change in each of the following.
  1. Domestic Production
  2. Domestic Consumption
  3. Consumer Surplus
  4. Producer Surplus