FRQs 2-3 – Short

Overview

• 2 short free-response questions, each worth 5 points
• Approximately 15 minutes per question (30 minutes total)
• Together make up 16.7% of your total exam score (the other half of the FRQ section)
• Calculator allowed for both questions
• Each typically focuses on one specific topic area rather than integrating multiple concepts
• Usually 4-5 parts each, with parts worth 1 point each

Short FRQs are more focused than the long FRQ. While the long question tells an elaborate economic story, short questions zoom in on specific concepts. One might focus entirely on game theory, while another examines price discrimination or externalities. This focused nature means you need to be precise and efficient.

Strategy Deep Dive

Short FRQs reward different skills than the long question. Here, speed and accuracy matter more than elaborate development. You're proving you can apply specific economic tools correctly, not constructing extended arguments.

Rapid Concept Identification

Within 30 seconds of reading, you should identify the core concept being tested. Is this game theory? Externalities? Monopoly pricing? Price discrimination? Factor markets? This identification shapes your entire approach.

Each topic has its own toolkit. Game theory requires payoff matrix analysis. Externalities need social vs. private cost curves. Monopoly pricing uses MR and MC. Don't waste time considering tools from other topics - focus immediately on the relevant framework.

Short FRQs often telegraph their focus in the first sentence. "Two firms are considering whether to advertise" signals game theory. "A monopolist can identify two distinct groups of consumers" indicates price discrimination. "Production of widgets creates pollution" means externalities. Train yourself to recognize these signals instantly.

Streamlined Response Strategy

Unlike the long FRQ where you might write extended explanations, short FRQs often want brief, targeted answers. When a question asks "What is Firm A's profit if...?", they want a number, not a paragraph about profit maximization. Save your writing energy for parts that specifically request explanation.

This doesn't mean being careless. Your brief answers must be precisely correct. If asked for a Nash equilibrium, state both players' strategies clearly. If asked for quantity, include units. If asked for a price, include the dollar sign. These details matter when responses are brief.

The 5-point structure typically means straightforward scoring. Unlike the long FRQ where a single graph might be worth 3-4 points, here each part usually earns 1 point. This democratization of points means you can't afford to skip parts. Even if you're unsure, attempt every section.

Common Topic Patterns

Short FRQs rotate through a predictable set of topics. Mastering these specific applications is more efficient than trying to prepare for everything.

Game Theory questions almost always use a 2×2 payoff matrix. You'll need to identify dominant strategies, find Nash equilibria, and compare competitive with cooperative outcomes. The math is simple - the challenge is interpreting strategic interactions correctly.

Externality questions focus on the gap between private and social costs/benefits. You'll draw MSC (marginal social cost) above MPC (marginal private cost) for negative externalities, or MSB (marginal social benefit) above MPB (marginal private benefit) for positive externalities. The deadweight loss triangle and optimal Pigouvian tax/subsidy are standard calculations.

Price discrimination questions test three concepts: different prices for different groups, quantity differences between groups, and profit comparisons with and without discrimination. Remember that successful price discrimination requires market power, identifiable groups with different elasticities, and prevention of resale.

Factor market questions often appear when not covered in the long FRQ. These focus on MRP = MFC for hiring decisions, monopsony power in labor markets, or economic rent. The graphs mirror product market analysis but with wages and labor quantity on the axes.

Rubric Breakdown

Short FRQ rubrics are typically more straightforward than long FRQ rubrics. With only 5 points available, there's less room for partial credit on each component. Precision becomes crucial.

Make an Assertion (1 point each)

Many short FRQ parts simply ask you to identify or state something: "What is the Nash equilibrium?", "Will profits increase or decrease?", "Is this firm hiring the optimal quantity of labor?" These are binary - you either get the point or you don't.

For these assertion points:

• Answer exactly what's asked (don't elaborate unless requested)
• Use proper economic terminology
• Be definitive in your answer (avoid hedging)
• Include units where applicable ($, quantity, etc.)

Perform Numerical Analysis (1 point each)

Calculation points in short FRQs are usually straightforward applications of formulas. Common calculations include:

• Finding specific payoffs from a game theory matrix
• Calculating deadweight loss areas (1/2 × base × height)
• Determining optimal quantities where curves intersect
• Computing changes in profit or surplus

Show your work even for simple calculations. Writing "Profit = $250 - $100 = $150" takes two seconds and ensures you get credit even if you misread the matrix initially. Naked numbers without context are risky.

Explain (1 point each)

When short FRQs ask for explanation, they want focused economic reasoning, not essays. A good explanation has three components:

1. State the relevant economic principle
2. Apply it to the specific scenario
3. State the conclusion

For example: "Both firms choosing to advertise is a Nash equilibrium because neither firm can increase its profit by unilaterally changing its strategy. If Firm A advertises, Firm B earns $180 by advertising but only $100 by not advertising. If Firm B advertises, Firm A earns $150 by advertising but only $100 by not advertising. so, both choose to advertise."

Create Graphs or Visuals (1-2 points typical)

Short FRQs usually require at most one graph, and it's typically worth 1-2 points. These graphs are more focused than long FRQ graphs. You might show:

• MSC and MPC curves for an externality
• A monopsonist's labor market diagram
• Consumer and producer surplus areas

The same labeling rules apply: every curve, every axis, every point of interest must be clearly labeled. But you don't need to include elements beyond what's asked. If they want deadweight loss from an externality, don't add consumer and producer surplus unless specifically requested.

Specific Topic Strategies

Each common short FRQ topic has specific strategies that can save time and prevent errors. Master these approaches for the most likely topics.

Game Theory Mastery

Game theory questions follow a predictable sequence. First, identify each player's payoffs in each scenario. Circle or highlight these in the matrix to avoid misreading. Remember the convention: first number is Row player's payoff, second is Column player's payoff.

To find dominant strategies, compare payoffs systematically. For each player, ask: "Regardless of what my opponent does, do I have one strategy that's always better?" If yes, that's dominant. If no, there's no dominant strategy. Don't confuse dominant strategies with best responses - dominant means always better, not sometimes better.

Nash equilibrium occurs where each player's strategy is a best response to the other's. Check each cell: would either player want to deviate unilaterally? If no, it's a Nash equilibrium. There can be multiple Nash equilibria, or none at all. The exam often asks you to identify all of them.

The cooperation question appears frequently: "If the firms could cooperate, what would they choose?" Find the cell with the highest combined payoff. This often differs from the Nash equilibrium, illustrating why cartels are unstable - individual incentives undermine collective benefit.

Externality Analysis

Externality questions have a standard structure. First, identify whether it's positive or negative. Negative externalities (pollution) mean social cost exceeds private cost. Positive externalities (education) mean social benefit exceeds private benefit.

For negative externalities, MSC lies above MPC. The vertical distance represents the external cost per unit. The free market produces where MPC = MB, but efficiency requires MSC = MB. The overproduction creates deadweight loss - the triangle between MSC and MB from efficient quantity to market quantity.

The Pigouvian tax equals the external cost per unit at the efficient quantity. This internalizes the externality, shifting MPC up to match MSC. After the tax, the market naturally produces the efficient quantity. Don't confuse the tax amount with the deadweight loss - they're related but distinct concepts.

For positive externalities, the logic reverses. MSB exceeds MPB, the market underproduces, and a subsidy equal to the external benefit can restore efficiency. The graphs mirror negative externalities but with benefit curves instead of cost curves.

Price Discrimination Dynamics

Price discrimination questions test whether you understand both the mechanics and requirements. Perfect (first-degree) price discrimination means charging each consumer their maximum willingness to pay. This eliminates consumer surplus entirely but also eliminates deadweight loss - it's unfair but efficient.

Third-degree price discrimination (different prices for different groups) is more common on the exam. The monopolist identifies groups with different demand elasticities. The group with more inelastic demand pays a higher price. This isn't arbitrary - it follows from MR = MC optimization in each market.

When comparing discriminating vs. uniform pricing, remember: price discrimination increases profit (otherwise the firm wouldn't do it), may increase or decrease total output, and definitely reduces consumer surplus. Whether it improves efficiency depends on whether output increases or decreases.

Factor Market Applications

Short FRQs on factor markets typically focus on one key insight: firms hire inputs where MRP = MFC. In competitive labor markets, MFC = wage, so firms hire where MRP = w. The MRP curve is the labor demand curve.

Monopsony questions mirror monopoly logic. The monopsonist faces an upward-sloping labor supply curve. The MFC curve lies above it because hiring another worker requires raising wages for all workers. The monopsonist hires where MRP = MFC but pays the wage on the supply curve below that point.

Economic rent appears in factor market questions. It's payment above what's necessary to keep a factor in its current use. For workers, it's the area above the supply curve and below the wage. For specialized factors with perfectly inelastic supply, all payment is economic rent.

Time Management Reality

With 15 minutes per question, time management for short FRQs is about efficiency, not rushing. You have enough time to be careful, but not enough to be elaborate.

Spend your first minute fully understanding what's being asked. Short FRQs can be tricky because they're so focused. Missing one key detail can cascade through all your answers. If it's game theory, verify you're reading the payoff matrix correctly. If it's externalities, confirm whether it's positive or negative.

Allocate time proportionally to point values, but remember most parts are worth 1 point each. This suggests spending 2-3 minutes per part. However, some parts are quicker than others. Stating a Nash equilibrium takes 30 seconds. Drawing and labeling a graph takes 3 minutes. Balance so.

If you're stuck on a calculation, don't let it consume excessive time. Write down what you know, show your setup, and move on. You might earn partial credit, and later parts might not depend on that specific number. Sometimes part (c) asks about the concept behind the calculation in part (b), and you can answer correctly even if your calculation was wrong.

The two short FRQs are independent. If you're struggling with one, don't let it affect your performance on the other. Each represents a fresh start with a different topic. Mental reset between questions is crucial - take a breath, clear the previous topic from your mind, and approach the new question with fresh eyes.

Common Mistakes to Avoid

Short FRQs punish specific mistakes harshly because there's less room for recovery. Understanding these pitfalls helps you avoid them.

Game Theory Pitfalls

The most common mistake is misreading the payoff matrix. Always verify: first number is Row player, second is Column player. Drawing arrows to show each player's payoffs can prevent confusion. Also, don't assume symmetry - just because one player has a dominant strategy doesn't mean both do.

Another frequent error is confusing Nash equilibrium with optimal outcome. The Nash equilibrium might be inefficient (like in Prisoner's Dilemma). When asked about cooperation, don't just state the Nash equilibrium again - find the highest total payoff.

Externality Errors

Students often draw externality curves backward. Remember: negative externalities push cost curves UP (MSC > MPC), positive externalities push benefit curves UP (MSB > MPB). The external effect adds to the private curve, not subtracts from it.

Deadweight loss triangles are frequently misidentified. The triangle's vertices are: the efficient quantity, the market quantity, and the point where the relevant curves intersect. Don't include areas that represent transfers between consumers and producers - only the pure efficiency loss counts.

Price Discrimination Confusion

A critical error is assuming price discrimination always improves efficiency. It only improves efficiency if it increases total output closer to the competitive level. If output doesn't change or decreases, efficiency worsens despite higher profits.

Students also confuse requirements for price discrimination. Market power is necessary but not sufficient. You also need identifiable groups with different elasticities AND ability to prevent resale. Missing any requirement means price discrimination fails.

Factor Market Mix-ups

The biggest confusion is between movements along and shifts of factor demand curves. Changes in output price shift labor demand (MRP = MP × P). Changes in wages cause movements along the labor demand curve. This mirrors the logic of product markets but students often reverse it.

In monopsony, students frequently draw MFC below the supply curve. Remember: MFC > wage in monopsony, just as MR < price in monopoly. The wedge goes the same direction - the curve representing the firm's decision lies on the side away from the competitive outcome.

Final Thoughts

Short FRQs test focused application of specific economic models. Success requires precision, efficiency, and deep understanding of core concepts. You can't hide behind lengthy explanations or hope for partial credit from elaborate attempts. Either you know how to analyze a game theory matrix or you don't.

This focused nature is actually an advantage. Unlike the long FRQ where topics blend together, short FRQs let you compartmentalize. Master each topic independently: game theory, externalities, price discrimination, factor markets. When you see which topic is being tested, you can immediately access the relevant toolkit.

Practice with released short FRQs, timing yourself strictly. 15 minutes feels different under exam pressure than during relaxed practice. Build the habit of quick topic identification, efficient analysis, and precise communication. Remember that perfection isn't required - earning 4/5 on each short FRQ, combined with solid performance elsewhere, puts you well on track for a 5.

The calculator helps with computations, but the real challenge is economic thinking. Know when to find Nash equilibria, how to identify deadweight loss, where to set optimal taxes, and why firms price discriminate. Master these concepts, and the short FRQs become opportunities to show your economic understanding efficiently and effectively.