AP Micro · Unit 2 · Supply and Demand

136 AP-style multiple-choice questions and 5 free-response questions for AP Micro · Unit 2 · Supply and Demand, sorted into 8 topics. Free sample questions for every topic.

136 multiple-choice5 free-response

Sample free-response question

The market for wheat flour in Vintrala is perfectly competitive and in equilibrium at a price of $8 per bag and a quantity of 24 thousand bags per week. The government imposes a price ceiling of $5 per bag. At $5, the quantity demanded is 30 thousand bags and the quantity supplied is 12 thousand bags.

(a) Draw a correctly labeled graph of the market for wheat flour in Vintrala. On your graph, include:

(i) the demand curve $D$ and the supply curve $S$
(ii) the equilibrium price $P_e = {\char36}8$ and equilibrium quantity $Q_e = 24$ , labeled as point $E$
(iii) the price ceiling at $P_c = {\char36}5$ , drawn as a horizontal line below $P_e$
(iv) the quantity demanded at $P_c$ , labeled $Q_d$
(v) the quantity supplied at $P_c$ , labeled $Q_s$ .
(b) On your graph in part (a), show the shortage that results from the price ceiling.
(c) With the price ceiling in effect, what quantity of wheat flour will actually be bought and sold? Explain.
(d) As a result of the price ceiling, will producer surplus increase, decrease, or remain the same? Explain.
(e) Does the price ceiling create a deadweight loss? Explain.

Practice AP Micro · Unit 2 · Supply and Demand