AP® Microeconomics · Free response

Apple pickers: a competitive labor market and one orchard, and a rise in the demand for apples

write it first, then score yourself point by point

Long free-response question · four-function calculator · 10 points · about 25 minutes

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The question

Name: ______________________   Date: ____________   Apple pickers: a competitive labor market and one orchard, and a rise in the demand for apples (10 points)

In the invented Tamsin Valley, many orchards sell apples in a perfectly competitive market and hire apple pickers in a perfectly competitive labor market. Brindle Orchard is one typical orchard. Assume the orchards maximize profit.

  1. (A) Draw correctly labeled side-by-side graphs for the labor market for apple pickers and for Brindle Orchard. On your graphs, show the market wage, labeled WM; the labor supply curve Brindle faces; and the number of pickers Brindle hires, labeled qF. [3 points]

  2. (B) Explain why the labor supply curve that Brindle Orchard faces is horizontal. [1 point]

  3. (C) Brindle Orchard's fifth picker adds 30 bushels of apples a day, and apples sell for $4 a bushel. Calculate the marginal revenue product of the fifth picker. Show your work. [1 point]

  4. (D) The market wage for pickers is $100 a day. (i) Identify whether Brindle Orchard will hire the fifth picker. (ii) Explain your answer using marginal analysis. [2 points]

  5. (E) The demand for apples increases. On a correctly labeled graph of the labor market for apple pickers, show the effect on the market wage and the number of pickers hired. [2 points]

  6. (F) Explain why the increase in the demand for apples changes the demand for apple pickers. [1 point]