Transcript AP Microecnomics

AP Microeconomics
Free Response Questions
Label Graphs Clearly and Correctly
• Label both axes
• Label all curves
• Label curve shifts using arrows, dotted
line, and numbers (e.g., S1 and S2)
• Label price changes and quantity changes
using arrows and numbers (e.g., P1 and
P2)
Example: Supply and Demand
- Axes labeled
P
S1
- S and D labeled
S2
- S shift labeled
- Equilibrium labeled
Pe
- Q change labeled
- P change labeled
- Directional arrows used
P2
D
Qe
Q2
Q
Mistakes/Suggestions
• Mislabeled or unlabeled graphs
• Missing or unlabeled P and Q changes
• Side-by-side graphs drawn as anything but sideby-side
• Teeny, tiny graphs
• Messy and illegible….really messy and really
illegible….graphs
• Use proper terms
• Track answer format to question format
• Answer questions in any order
Tips
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Big Two for free-response: Market structure & factor markets
Free-response prediction…externality??...game theory??
Product market v. factor market
Firm v. industry….Firm: (a) price taker (b) “can sell/hire all it wants” (c) horizontal curve
“Profit-maximizing” signifies producing at MC = MR…not necessarily experiencing positive profit
Lots of Qs about how much to produce…look at where firm is w/ respect to MC = MR
Lump-sum taxes (or subsidies) shift total cost curves whereas per-unit taxes (or subsidies) shift
marginal cost curves or marginal revenue curves
Patent or license….synonymous with monopoly
Elasticity and demand curve….above mid-point (MR positive): elastic; below mid-point (MR
negative): inelastic; at mid-point (MR = 0), unit elastic
Monopsony….sole buyer
VMPL is synonymous with MRP
Horizontal (e.g., own all burger producers) v. vertical integration (e.g., own/control all aspects of
burger production…cows, potatoes, trains to ship cows/potatoes, straws, cups, etc.)
Watch for “True…False…Uncertain” format on free-response questions
Allocative (or economic) efficiency: P = MC
Technical(or productive)efficiency: P = min ATC
“Normal” profit is synonymous with zero economic profit
Least cost allocation: VMPL/w = VMPK/r….MRP/w = MRP/w…
Gini coefficient (i.e., Gini index)….income inequality…Lorenz curve