2004, Question 1 · 12 points
Externality under monopoly and competition
Use a given graph to decide whether the externality is positive or negative, find the socially optimal output, and for both a monopoly and a competitive industry find unregulated output and the per-unit tax or subsidy that fixes it.
This exam had three free-response questions in 50 minutes of writing time after a 10 minute planning period, with about half the time suggested for Question 1 and the rest split evenly between Questions 2 and 3. The current exam has 3 free-response questions in 60 minutes. The skills these questions practice still count.
Lessons this question draws on
1 Read the question
The question is College Board's, from the 2004 exam. It starts on page 2 of the PDF. College Board no longer posts this exam, so it opens from the copy of College Board's PDF that the Internet Archive saved on May 6, 2025.
2 Write your answer
Answer each part the way you would on the exam, in full sentences, with your work shown. Your writing saves as you type.
3 Score it
Score your answer against College Board's scoring guidelines, one point at a time. Give yourself a point only when your answer says what the guideline asks for.
Scoring guidelines (PDF, page 2) What the exam readers saw (Student Performance Q&A)
Question, scoring guidelines and Chief Reader report: College Board, from the Internet Archive. The title, summary are ours.