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2019, Set 2, Question 3 · 6 points

2019 AP Microeconomics FRQ 3 (Set 2) answers

Florists' closing time and delivery game

Use a payoff matrix to check for a dominant strategy, test a best response, and find the Nash equilibrium payoff and the merged firm's choice. Rebuild the matrix with a penalty for breaking an agreement and decide whether one firm would accept it.

Skip to the worked answer and scoring (try the question first if you can)

This exam had three free-response questions in a 60 minute section (10 minutes of reading and 50 of writing), 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 2019, Set 2 exam. It starts on page 4 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 December 20, 2025.

Open Question 3 (PDF, page 4)

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 6) What the exam readers saw (Chief Reader report)

4 Worked answer and scoring

Here is how a response that earns full credit could read, part by part, and what College Board's scoring guidelines look for, put in our own words. Open a part once you have written your own answer to it. The scoring guidelines PDF above is the official word on every point.

Each cell reads (Jackpot's profit, Boulevard's profit). Judge each firm's choice against its own payoffs only, with the other firm's action held fixed. The combined total matters only in part (d), where one owner keeps both profits.

Part a 1 point

Model answer

Closing at 6:00 p.m. is Jackpot's dominant strategy. If Boulevard delivers, Jackpot earns $35 at 6:00 against $25 at 9:00. If Boulevard does not deliver, Jackpot earns $55 at 6:00 against $45 at 9:00. 6:00 p.m. pays more either way.

What earns the point

  1. Jackpot's dominant strategy is to close at 6:00 p.m. It pays Jackpot more than 9:00 p.m. whichever action Boulevard takes. The dominant strategy rests on Jackpot's own profits, not on the totals of both firms.
Part b 1 point

Model answer

No. With Jackpot closing at 6:00 p.m., Boulevard earns $20 with No Delivery but $30 with Delivery. Switching to Delivery raises its profit by $10.

What earns the point

  1. Not profit-maximizing: given 6:00 p.m., Boulevard earns $30 with Delivery against $20 with No Delivery. Boulevard's best response is found in Jackpot's 6:00 p.m. row, comparing Boulevard's own payoffs, the second numbers.
Part c 1 point

Model answer

$30. Jackpot closes at 6:00 p.m. because it is dominant, and Boulevard's best response to that is Delivery ($30 against $20). Neither gains by switching alone: Jackpot would drop to $25, and Boulevard to $20. In that cell Boulevard earns $30.

What earns the point

  1. $30. The Nash equilibrium is 6:00 p.m. with Delivery, and $30 is Boulevard's own payoff there. The equilibrium payoff is neither the combined total nor the largest number in the matrix.
Part d 1 point

Model answer

Close at 9:00 p.m. and offer No Delivery. The merged company keeps both profits, so it compares the totals: $65 (6:00, Delivery), $75 (6:00, No Delivery), $75 (9:00, Delivery) and $85 (9:00, No Delivery). $85 is the largest.

What earns the point

  1. Close at 9:00 p.m. and choose No Delivery. One owner of both stores maximizes the sum of the two profits, and $45 + $40 = $85 is the highest sum. Each store's separate profit is no longer the target.
Part e 2 points

Model answer

(i) Breaking the agreement means Jackpot closing at 6:00 p.m. or Boulevard choosing Delivery. Each firm that breaks it loses $12 to the other.

  • 6:00 p.m. and Delivery: both break it, the transfers cancel, $35, $30.
  • 6:00 p.m. and No Delivery: Jackpot breaks it, $55 − $12 = $43 and $20 + $12 = $32.
  • 9:00 p.m. and Delivery: Boulevard breaks it, $25 + $12 = $37 and $50 − $12 = $38.
  • 9:00 p.m. and No Delivery: no one breaks it, $45, $40.

(ii) Yes. Under the agreement Jackpot now does better at 9:00 p.m. whatever Boulevard does ($37 against $35, and $45 against $43), and Boulevard does better with No Delivery whatever Jackpot does ($32 against $30, and $40 against $38). The new Nash equilibrium is 9:00 p.m. with No Delivery, where Boulevard earns $40. Without the agreement it earned $30 in the Nash equilibrium of part (c), so agreeing raises its profit by $10.

BoulevardDeliveryNo DeliveryJackpot6:00 p.m.9:00 p.m.$35, $30$43, $32$37, $38$45, $40First payoff: Jackpot. Second: Boulevard.BoulevardDeliveryNo DeliveryJackpot6:00 p.m.9:00 p.m.$35, $30$43, $32$37, $38$45, $40First payoff: Jackpot. Second: Boulevard.

What earns each point

  1. The matrix redrawn with both players and all four actions, and with $12 moved from the firm that breaks the agreement to the other: $35, $30; $43, $32; $37, $38; $45, $40. Each firm's own departure costs it $12 and pays its rival $12. When both depart, the two transfers cancel, and when neither does, nothing moves.
  2. Yes, Boulevard agrees: its profit rises from $30, in the original Nash equilibrium, to $40 in the new one. Boulevard compares what it earns with the agreement to what it earns without it. The penalty makes 9:00 p.m. and No Delivery the new equilibrium, and $40 is more than $30.

Common mistakes

From what the exam readers reported seeing in 2019 students' answers, in our words:

Question, scoring guidelines and Chief Reader report: College Board, from the Internet Archive. The title, summary and worked answer are ours.