AP Question of the week:

Refer to the graph to answer the questions that follow:

1. The graph above shows the short-run costs faced by a firm in a perfectly competitive industry. Identify the cost curves that are denoted by each of the following:
   1. Curve 1
   2. Curve 2
   3. Curve 3
2. Explain why Curve 1 intersects Curves 2 and 3 at the precise points that it does.
3. Identify and explain the economic “law” that determines and HOW it determines the shape of Curve 1.
4. At which price(s) would this firm be earning economic profits when producing at quantity Q1? Explain.
5. At which price(s) would this firm shut down when producing at Q1? Explain

IB Question of the week:

1. Explain how, in theory, a flexible exchange rate system should lead to the automatic stabilization of a nation’s current account balance. Use supply and demand diagrams to illustrate your answer
2. Referencing the Marshal Lerner Condition, explain the possible effects of a depreciation of a nation’s currency on its current account balance.

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Always looking for new ways to help students and teachers better grasp and learn economics, I have decided to begin a new feature on this blog. Once a week, I will post sample examination questions similar to those found on both the Advanced Placement and the International Baccalaureate exams. The purpose is to provide teachers and students with original questions that they can use for discussion in their own classes or as warm-up activities to begin a class.

The sections of the syllabus covered will vary each week, and will most likely reflect the topics I’m currently covering in my four economics classes. Since I teach both year 1 and year 2 IB Economics, AP Macro and AP Micro, the questions could cover any and all sections of the IB and AP syllabi. I will make it clear which section each question covers, as well as whether it is an IB style or AP style question.

So, without further ado, your first “Exam Questions of the Week”

IB Question of the week: Unit 4 – International Economics

Explain why a country’s large current account deficit puts downward pressure on its exchange rate and and why this may be inflationary for the country.

AP Question of the week: Unit 2.2 – Elasticities

Assume that hamburgers and french fries are complementary goods. The government decides to begin taxing the production of beef, an input in the production of hamburgers.

For each of the following markets, draw a supply and demand diagram showing the effect of a tax on beef producers.

1. The beef market
2. The hamburger market
3. the French fry market

Assume that the demand for hamburgers inelastic in the short-run. How will the tax on beef affect the revenues of hamburger producers.

In the long-run demand for hamburgers is elastic. Explain why this may be.

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