Suppose Belmore's wheat market has the positive externality shown, and government pays a subsidy equal to the vertical gap between MSB and MPB at Q2. Wheat output would
negative and positive externalities
Review negative and positive externalities for AP Microeconomics and try 2 free AP-style practice questions. 20 questions on this topic in AP Micro · Unit 6 · Market Failure and the Role of Government.
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Laptop production creates a positive externality for schools. If government subsidizes producers by the marginal external benefit at the socially optimal quantity, what happens to market quantity?
| Quantity | MPB | MEB | MPC |
|---|---|---|---|
| 100 | $80 | $30 | $50 |
| 200 | $60 | $30 | $60 |
| 300 | $40 | $30 | $70 |
| 400 | $20 | $30 | $80 |
18 more questions on this topic
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Answer, then see why
The price of gasoline rises 10% and the quantity demanded falls 5%. What happens to total revenue?
Not quite. The answer is B.
Why the other options are wrong
AI grading for free-response
Write your FRQ answer and get it scored point by point against the AP rubric, with the line from your answer that earned or missed each point.
Question 13 / 4 pts
Part a1 / 1 pts
Point 1: Earned
Grader confidence 94% sureReason: Correctly identifies demand for gasoline as inelastic.
Evidence: "The price of gasoline rises and the quantity falls only a little."
Part b2 / 3 pts
Point 1: Earned
Grader confidence 91% sureReason: Graph shows relatively inelastic demand.
Evidence: Draws a steep demand curve.
Point 2: Earned
Grader confidence 88% sureReason: Correct new equilibrium price.
Evidence: Shifts supply left, P1 → P2.
Point 3: Not earned
Grader confidence 82% sureReason: With inelastic demand, a price increase raises total revenue.
Evidence: "Revenue goes down."