Download Test 3 Scoring Rubric

Test 3 Scoring Rubric
Draw a properly labeled graph that represents a perfectly competitive firm that will continue to
operate but is currently experiencing a loss.
 See Activity 31 Figure 31.2, Firm graph.
 Also refer to our website where I mention that YOU NEED TO KNOW THESE GRAPHS and
furthermore that you need to label equilibrium Price & Quantity on the test.
1 pt – X & Y Axis labeled properly (price\quantity)
1pt – Horizontal line for Price labeled P=MR
1 pt – MC curve has proper shape (upward sloping Nike swoosh)
1pt – output where MR=MC is labeled as Qe (or at least Q)
1pt – ATC & AVC curves are represented with proper shape including crossing MC at their minimum
1 pt – the point MR=MC is between ATC & AVC curves
2pts – Explanation, including something to the effect of:
They will not shut down because CURRENT losses are < Fixed Costs.
They would lose MORE by shutting down.
Question IV Free Response
Graph – Refer to Activity 31, Figure 31.4 (Firm)
1pt – P=MC at the minimum point of the ATC curve
.5pt – MC & ATC have proper shape
.5pt – Labels! (MC, ATC, P=MR, axis)
Explanation
1pt – P=Minimum ATC is Productive Efficiency. This is the least cost method of production using the
minimum amount of resources to produce output.
1pt – MB=MC is Allocative Efficiency. In Perfect Competition P =MB.
MB=MC illustrates that the value of the last unit (indicated by MB (P)) is = to the value of the
alternative goods sacrificed by production (MC). Any other point would result in under or over
allocation of resources.
THIS CAN BE SEEN CLEARLY IN THE VIDEO I HAVE REPEATEDLY PROMOTED
Question I. Free Response
Part a.)
Market\Industry - Refer to Activity 31, Figure 31.1
1 pt - Supply & Demand established for the market with Equilibrium Price & Quantity labeled (Pe,Qe)
1pt – X & Y Axis labeled properly (price and quantity)
Firm
1 pt – MC=MR at the Equilibrium price established by the market with P=MR and MC curve labeled
1 pt – MC=MR shows that Price > ATC (indicating a profit)
Part b.) An illustration of this can be seen in your textbook on page 591, graph (a). You can see the
Profit “rectangle” shaded in aqua and labeled “profit”.
1pt – Find the area of profit by first drawing a VERTICAL line from the MR=MC point straight down
to the ATC curve. From this point, a horizontal line is drawn to the Y axis. The rest of the rectangle
is created by the P=MR horizontal line from the Y axis to the MR=MC point.
Shade in this rectangle and label as Profit.
Part c.)
Market\Industry - Refer to Activity 31, Figure 31.5
1pt – Shift the Supply curve outward to the right and label properly (this could be S1 or S2
depending on what you labeled the original Supply curve-be consistent!).
1pt – Properly label new Equilibrium Price & Quantity as P1 & Q1 (be consistent as mentioned above
– if original Price is labeled P then the new Price can be labeled P1 or P2, but Quantity has to match)
Firm
1pt – New Price and Quantity properly labeled where P=MR=MC. The new price establishes a new
horizontal line for P\MR
1pt – P=Minimum ATC indicating a normal profit
Question II Free Response
Part a.)
Market\Industry - Refer to Activity 31, Figure 31.4
1 pt - Supply & Demand curves for the market establish an Equilibrium Price & Quantity labeled
properly (Pe,Qe)
1pt – X & Y Axis labeled properly (price and quantity)
Firm
1pt – P=Minimum ATC at the point where MR(P) = MC (indicating a normal profit)
1pt – Quantity is properly labeled where MR=MC. In order to do this properly, the Firm uses the
price established in the Market\Industry. Price is indicated with a horizontal line and labeled as
P=MR.
Part b.)
You need to have: Price is determined by the market\industry.
Output is determined by the point at which MR=MC.
Part c.)
Market\Industry - See attached graph
2pts – Shift the Supply curve outward to the right and label properly (this could be S1 or S2
depending on what you labeled the original Supply curve – be consistent!)
1pt - Properly label new Equilibrium Price & Quantity as Pe1 & Qe1 (be consistent as mentioned
above – if original Price is labeled Pe then the new Price can be labeled Pe1 or Pe2, but Quantity has
to match)
Firm
1pt – New price and quantity are labeled properly (horizontal line labeled as P=MR, Q1) and located
below original price.
Part d.)
Industry price has gone DOWN, quantity produced has gone UP