This video lesson is from the 2000 AP Microeconomics Exam. This video is designed for students to practice the question to enhance their content knowledge on monopolies, and as a resource for teachers to use in their classroom. There is no audio in this video lesson, just a continuous video of the questions and answers. The overall objective is for students to pause the video, answer the questions, and play the video to see if they get the questions correct. This is where teachers can explain why the answer is correct to their students if needed. I hope you find this video lesson helpful. This long microeconomics question tests the student's understanding of monopoly and the comparison of the monopoly result to the allocatively efficient outcome of perfect competition. In particular, the question addresses allocative efficiency in parts e through g. In responding to the question of the allocatively efficient output level (part e), students frequently seemed to be searching for a long-run competitive equilibrium in which the firm's long-run average cost would be at a minimum. In reality the question was seeking simply the short-run allocatively efficient output at which Price= Marginal Cost (or Marginal Social Benefit=Marginal Social Cost). Also, many students missed entirely the concept of consumer surplus. Finally, while many students realized that the monopolist should increase output to be allocatively efficient and that the subsidy was the correct policy tool, few students were able to explain how the subsidy, by decreasing marginal cost or increasing marginal revenue, would increase output toward the allocatively efficient level.