Common Errors on the 2006 AP Economics Exam. Arthur Raymond Muhlenberg College Chief Reader, Economics. Common Errors on the 2006 Exam Micro 1, Part (c).
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Chief Reader, Economics
The first two rows above the above table were provided on the exam and
it was stated that the firm is perfectly competitive. To maximize profits,
firms should produce if MR>MC, until MR=MC, but never produce a unit
for which MR<MC. P=MR is $20 and the MC is calculated in the second table.
Thus the first four units should be produced.
Common Error: Most students got Q=4, but the reason offered was
because MR is closest to MC at Q=4. That is NOT the reason.
Common Errors: Mislabeled graph, inability to link reduced
output with reduced imports and supply of dollars.
Common Errors: General unfamiliarity with the loanable funds framework.
Many used the money supply and money demand framework.
(i) The new nominal interest rate.
(ii) The new real interest rate.
(i) Explain how this affects the natural rate of unemployment.
(ii) Using a correctly labeled graph, show how this affects the long-run Phillips Curve.
Common Error: Use of a downward sloping Phillips curve.