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ap_microeconomics [2024/04/11 00:47] – created mrdoughap_microeconomics [2024/04/20 05:37] (current) – external edit 127.0.0.1
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     * Marginal analysis: the study of the additional benefits vs the additional cost of an activity     * Marginal analysis: the study of the additional benefits vs the additional cost of an activity
  
-2. Supply and Demand+=====2. Supply and Demand=====
  
 2.1 Demand 2.1 Demand
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   * Shifters of supply: price/availability of resources, number of sellers, technology, government actions (taxes, subsidies), prices of other related goods, expectations of future profit.   * Shifters of supply: price/availability of resources, number of sellers, technology, government actions (taxes, subsidies), prices of other related goods, expectations of future profit.
  
-[[AP%20Micro%20Study%20Guide%20c7825824723445efa613f06eb9556e84:image2|{{AP%20Micro%20Study%20Guide%20c7825824723445efa613f06eb9556e84:image2.jpeg}}]]> 2.3 Price Elasticity of Demand+[[AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84:image2|{{AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84:image2.jpeg}}]]> 2.3 Price Elasticity of Demand
  
-[[AP%20Micro%20Study%20Guide%20c7825824723445efa613f06eb9556e84:image3|{{AP%20Micro%20Study%20Guide%20c7825824723445efa613f06eb9556e84:image3.jpeg}}]]> - e​​= 0 means you are perfectly elastic d StudyResources AP Microeconomics Review Sheet. ​[[https://t.me/apresources|https://t.me/apresources]] e​​< 1 means you are relatively inelastic d e​​= 1 means you are unit elastic d e​​> 1 means you are relatively elastic d e​​= ∞ means you are perfectly inelastic d Midpoint formula (to find e​): d​ +[[AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84:image3|{{AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84:image3.jpeg}}]]> - e​​= 0 means you are perfectly elastic d  e​​< 1 means you are relatively inelastic d e​​= 1 means you are unit elastic d e​​> 1 means you are relatively elastic d e​​= ∞ means you are perfectly inelastic d Midpoint formula (to find e​): d​ 
  
-[[AP%20Micro%20Study%20Guide%20c7825824723445efa613f06eb9556e84:image4|{{AP%20Micro%20Study%20Guide%20c7825824723445efa613f06eb9556e84:image4.jpeg}}]]> Total Revenue Test:+[[AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84:image4|{{AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84:image4.jpeg}}]]> Total Revenue Test:
  
-[[AP%20Micro%20Study%20Guide%20c7825824723445efa613f06eb9556e84:Untitled|{{AP%20Micro%20Study%20Guide%20c7825824723445efa613f06eb9556e84:Untitled.png}}]]> 2.4 Price Elasticity of Supply+[[AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84:Untitled|{{AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84:Untitled.png}}]]> 2.4 Price Elasticity of Supply
  
-[[AP%20Micro%20Study%20Guide%20c7825824723445efa613f06eb9556e84:image5|{{AP%20Micro%20Study%20Guide%20c7825824723445efa613f06eb9556e84:image5.jpeg}}]]> - responsiveness of quantity supplied to price changes Determinants of price elasticity of supply: Time and price of alternative inputs “market-period” **→** firms care unable to respond to price change **→** inelastic short-run **→** firms can only increase production with existing factories **→** elastic - long-run **→** firms can expand or reduce factory capacity **→** highly elastic must be positive since higher prices=larger quantities supplied - e​​= 0 means you are perfectly $e_s$< 1 means you are relatively inelastic $e_s$= 1 means you are unit elastic $e_s$> 1 means you are relatively elastic $e_s$= ∞ means you are perfectly elastic 2.5 Other Elasticities +[[AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84:image5|{{AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84:image5.jpeg}}]]> - responsiveness of quantity supplied to price changes Determinants of price elasticity of supply: Time and price of alternative inputs “market-period” **→** firms care unable to respond to price change **→** inelastic short-run **→** firms can only increase production with existing factories **→** elastic - long-run **→** firms can expand or reduce factory capacity **→** highly elastic must be positive since higher prices=larger quantities supplied - e​​= 0 means you are perfectly $e_s$< 1 means you are relatively inelastic $e_s$= 1 means you are unit elastic $e_s$> 1 means you are relatively elastic $e_s$= ∞ means you are perfectly elastic 2.5 Other Elasticities 
  
   * Quantity of a good demanded/supplied is not just dependent on price, so other elasticities can be measured for other factors beyond price as well   * Quantity of a good demanded/supplied is not just dependent on price, so other elasticities can be measured for other factors beyond price as well
  
-[[AP%20Micro%20Study%20Guide%20c7825824723445efa613f06eb9556e84:image6|{{AP%20Micro%20Study%20Guide%20c7825824723445efa613f06eb9556e84:image6.jpeg}}]]  * Measures how much the demand of a certain good can be affected by price of a related good (when the goods are complements or substitutes)+[[AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84:image6|{{AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84:image6.jpeg}}]]  * Measures how much the demand of a certain good can be affected by price of a related good (when the goods are complements or substitutes)
  
   * If the cross-price elasticity of demand is positive, the goods are substitutes   * If the cross-price elasticity of demand is positive, the goods are substitutes
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     * Quantity demanded decreases with increased income     * Quantity demanded decreases with increased income
  
-[[AP%20Micro%20Study%20Guide%20c7825824723445efa613f06eb9556e84:image7|{{AP%20Micro%20Study%20Guide%20c7825824723445efa613f06eb9556e84:image7.jpeg}}]]> 2.6 Market Equilibrium and Consumer and Producer Surplus+[[AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84:image7|{{AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84:image7.jpeg}}]]> 2.6 Market Equilibrium and Consumer and Producer Surplus
  
   * Equilibrium: Where supply and demand intersect gives equilibrium price and quantity   * Equilibrium: Where supply and demand intersect gives equilibrium price and quantity
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   * Consumer Surplus: Difference between how much buyers are willing to pay and the   * Consumer Surplus: Difference between how much buyers are willing to pay and the
  
-> price they do pay. Aka as: [[AP%20Micro%20Study%20Guide%20c7825824723445efa613f06eb9556e84:image8|{{AP%20Micro%20Study%20Guide%20c7825824723445efa613f06eb9556e84:image8.jpeg}}]] +> price they do pay. Aka as: [[AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84:image8|{{AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84:image8.jpeg}}]] 
  
   * Producer Surplus: Difference between the price and how much the seller is willing to sell the product for   * Producer Surplus: Difference between the price and how much the seller is willing to sell the product for
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   * Usually due to a Price Floor: government sets minimum price ABOVE equilibrium, creates excess supply (surplus)   * Usually due to a Price Floor: government sets minimum price ABOVE equilibrium, creates excess supply (surplus)
  
-[[AP%20Micro%20Study%20Guide%20c7825824723445efa613f06eb9556e84:image9|{{AP%20Micro%20Study%20Guide%20c7825824723445efa613f06eb9556e84:image9.png}}]]  * Double shift rule: If two curves shift at once, either price or quantity will be indeterminate, you will know the other one+[[AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84:image9|{{AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84:image9.png}}]]  * Double shift rule: If two curves shift at once, either price or quantity will be indeterminate, you will know the other one
  
-[[AP%20Micro%20Study%20Guide%20c7825824723445efa613f06eb9556e84:image10|{{AP%20Micro%20Study%20Guide%20c7825824723445efa613f06eb9556e84:image10.png}}]]> 2.8.2: Quantity Controls+[[AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84:image10|{{AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84:image10.png}}]]> 2.8.2: Quantity Controls
  
   * Quota: quantity control saying only x amount can be bought or sold   * Quota: quantity control saying only x amount can be bought or sold
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   * Supply price: price at which given quantity is supplied   * Supply price: price at which given quantity is supplied
  
-> StudyResources AP Microeconomics Review Sheet. ​https://t.me/apresources+> 
  
   * Transactions   * Transactions
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   * Quotas - A limit on the quantity of a good that may be imported in a given time period.   * Quotas - A limit on the quantity of a good that may be imported in a given time period.
  
-> StudyResources AP Microeconomics Review Sheet. ​https://t.me/apresources+> 
  
-3. Production, Cost, and the Perfect Competition Model+=====3. Production, Cost, and the Perfect Competition Model=====
  
 > 3.1: The Production Function Key Terms:  > 3.1: The Production Function Key Terms: 
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   * Labor refers to the human work that goes into production. Typically economists assume that labor is a variable factor of production.   * Labor refers to the human work that goes into production. Typically economists assume that labor is a variable factor of production.
  
-> StudyResources AP Microeconomics Review Sheet. ​https://t.me/apresources+> 
  
   * The marginal product of an input is the amount of output that is gained by using one additional unit of that input. It can be found by taking the derivative of the production function in terms of the relevant input.   * The marginal product of an input is the amount of output that is gained by using one additional unit of that input. It can be found by taking the derivative of the production function in terms of the relevant input.
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   - Average Total Cost:   - Average Total Cost:
  
-[[AP%20Micro%20Study%20Guide%20c7825824723445efa613f06eb9556e84:image11|{{AP%20Micro%20Study%20Guide%20c7825824723445efa613f06eb9556e84:image11.png}}]]Example of Calculating Marginal Cost (finding the difference between each total cost)+[[AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84:image11|{{AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84:image11.png}}]]Example of Calculating Marginal Cost (finding the difference between each total cost)
  
-[[AP%20Micro%20Study%20Guide%20c7825824723445efa613f06eb9556e84:image12|{{AP%20Micro%20Study%20Guide%20c7825824723445efa613f06eb9556e84:image12.jpeg}}]]> 3.3 Long-Run Production Costs+[[AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84:image12|{{AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84:image12.jpeg}}]]> 3.3 Long-Run Production Costs
  
   * The long-run looks at situations when all resources are variable (no fixed costs)   * The long-run looks at situations when all resources are variable (no fixed costs)
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   * Constant returns to scale means that LRATC remains the same as more is produced   * Constant returns to scale means that LRATC remains the same as more is produced
  
-> StudyResources AP Microeconomics Review Sheet. ​https://t.me/apresources+> 
  
   * The firm is so efficient now that it can’t reach a lower cost per item   * The firm is so efficient now that it can’t reach a lower cost per item
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     * Workers interfere with each other (coordination of each worker decreases)     * Workers interfere with each other (coordination of each worker decreases)
  
-[[AP%20Micro%20Study%20Guide%20c7825824723445efa613f06eb9556e84:image13|{{AP%20Micro%20Study%20Guide%20c7825824723445efa613f06eb9556e84:image13.png}}]]> 3.4 Types of Profit+[[AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84:image13|{{AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84:image13.png}}]]> 3.4 Types of Profit
  
   * Economic profit = profit = π = TR - TC = (P-ATC)Q   * Economic profit = profit = π = TR - TC = (P-ATC)Q
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 > 3.6 Firms’ Short-Run Decisions to Produce and Long-Run Decisions to Enter or Exit a Market > 3.6 Firms’ Short-Run Decisions to Produce and Long-Run Decisions to Enter or Exit a Market
  
-[[AP%20Micro%20Study%20Guide%20c7825824723445efa613f06eb9556e84:image14|{{AP%20Micro%20Study%20Guide%20c7825824723445efa613f06eb9556e84:image14.jpeg}}]]> 3.6.1 Short Run+[[AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84:image14|{{AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84:image14.jpeg}}]]> 3.6.1 Short Run
  
   * Shutdown rule: In the short run, a firm should produce as long as long as P ≥ AVC   * Shutdown rule: In the short run, a firm should produce as long as long as P ≥ AVC
     * if a firm’s AVC is higher than the price, they are better off shutting down in the short run and only paying their fixed costs than continuing to produce and paying their fixed and variable costs     * if a firm’s AVC is higher than the price, they are better off shutting down in the short run and only paying their fixed costs than continuing to produce and paying their fixed and variable costs
  
-> StudyResources AP Microeconomics Review Sheet. ​https://t.me/apresources+> 
  
 3.6.2 Long Run 3.6.2 Long Run
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 Case 1: Normal Profit: Case 1: Normal Profit:
  
-[[AP%20Micro%20Study%20Guide%20c7825824723445efa613f06eb9556e84:image15|{{AP%20Micro%20Study%20Guide%20c7825824723445efa613f06eb9556e84:image15.jpeg}}]]> StudyResources AP Microeconomics Review Sheet. ​https://t.me/apresources+[[AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84:image15|{{AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84:image15.jpeg}}]]> 
  
 Case 2: Positive Economic Profit (Profit): Case 2: Positive Economic Profit (Profit):
  
-[[AP%20Micro%20Study%20Guide%20c7825824723445efa613f06eb9556e84:image16|{{AP%20Micro%20Study%20Guide%20c7825824723445efa613f06eb9556e84:image16.jpeg}}]]Case 3: Negative Economic Profit (Losses):+[[AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84:image16|{{AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84:image16.jpeg}}]]Case 3: Negative Economic Profit (Losses):
  
-[[AP%20Micro%20Study%20Guide%20c7825824723445efa613f06eb9556e84:image17|{{AP%20Micro%20Study%20Guide%20c7825824723445efa613f06eb9556e84:image17.jpeg}}]]Example with curves shifting:+[[AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84:image17|{{AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84:image17.jpeg}}]]Example with curves shifting:
  
-[[AP%20Micro%20Study%20Guide%20c7825824723445efa613f06eb9556e84:image18|{{AP%20Micro%20Study%20Guide%20c7825824723445efa613f06eb9556e84:image18.jpeg}}]]> StudyResources AP Microeconomics Review Sheet. ​https://t.me/apresources+[[AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84:image18|{{AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84:image18.jpeg}}]]> 
  
-4. Imperfect Competition+=====4. Imperfect Competition=====
  
 4.1 Introduction to Imperfectly Competitive Markets 4.1 Introduction to Imperfectly Competitive Markets
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 > Most Competitive Least Competitive > Most Competitive Least Competitive
  
-[[AP%20Micro%20Study%20Guide%20c7825824723445efa613f06eb9556e84:image19|{{AP%20Micro%20Study%20Guide%20c7825824723445efa613f06eb9556e84:image19.jpeg}}]]  * Common barriers that prevent other firms from entering an imperfectly competitive market: Economies of scale (high start-up costs), control of scarce resources, governmental or legal barriers+[[AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84:image19|{{AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84:image19.jpeg}}]]  * Common barriers that prevent other firms from entering an imperfectly competitive market: Economies of scale (high start-up costs), control of scarce resources, governmental or legal barriers
  
   * Herfindahl--Hirschman Index, or HHI, is the square of each firm’s share of market sales summed over the industry. It gives a picture of the industry market structure.   * Herfindahl--Hirschman Index, or HHI, is the square of each firm’s share of market sales summed over the industry. It gives a picture of the industry market structure.
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   * Concentration ratios: measure the percentage of industry sales accounted for by the “X” largest firms, for example, the four-firm concentration ratio or the eight-firm concentration ratio.   * Concentration ratios: measure the percentage of industry sales accounted for by the “X” largest firms, for example, the four-firm concentration ratio or the eight-firm concentration ratio.
  
-> StudyResources AP Microeconomics Review Sheet. ​https://t.me/apresources+> 
  
 4.2 Monopoly 4.2 Monopoly
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 > Monopoly: Downward-sloping demand curve - MR ≤ Demand  > Monopoly: Downward-sloping demand curve - MR ≤ Demand 
  
-[[AP%20Micro%20Study%20Guide%20c7825824723445efa613f06eb9556e84:image20|{{AP%20Micro%20Study%20Guide%20c7825824723445efa613f06eb9556e84:image20.jpeg}}]]> - Produces at profit Maximization: Q at MC=MR P = D at the point where MR=MC Sells at Price> MR **→** economic profit Deadweight loss **→** output below consumer/ producer surplus Supply curve = MC where MC ≥ AV C - Allocatively efficient since MR=MC Productively inefficient since it does not produce at the minimum ATC 4.3 Price Discrimination +[[AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84:image20|{{AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84:image20.jpeg}}]]> - Produces at profit Maximization: Q at MC=MR P = D at the point where MR=MC Sells at Price> MR **→** economic profit Deadweight loss **→** output below consumer: producer surplus Supply curve = MC where MC ≥ AV C - Allocatively efficient since MR=MC Productively inefficient since it does not produce at the minimum ATC 4.3 Price Discrimination 
  
   * Conditions: Have market power, be able to recognize differences in demand, prevent resale of product   * Conditions: Have market power, be able to recognize differences in demand, prevent resale of product
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   * Perfect Price discrimination ​eliminates deadweight loss **→** monopolist produce where P= MC to extract all economic surplus (D=MR)   * Perfect Price discrimination ​eliminates deadweight loss **→** monopolist produce where P= MC to extract all economic surplus (D=MR)
  
-[[AP%20Micro%20Study%20Guide%20c7825824723445efa613f06eb9556e84:image21|{{AP%20Micro%20Study%20Guide%20c7825824723445efa613f06eb9556e84:image21.jpeg}}]]  * Example: Coupons- a way to distinguish customers by their willingness to pay. Individuals who collect coupons are more price sensitive than those who don’t**→** charge higher price to price-sensitive customers and provide discount to price-sensitive individuals+[[AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84:image21|{{AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84:image21.jpeg}}]]  * Example: Coupons- a way to distinguish customers by their willingness to pay. Individuals who collect coupons are more price sensitive than those who don’t**→** charge higher price to price-sensitive customers and provide discount to price-sensitive individuals
  
-> StudyResources AP Microeconomics Review Sheet. ​https://t.me/apresources+> 
  
 4.4 Monopolistic Competition 4.4 Monopolistic Competition
  
-[[AP%20Micro%20Study%20Guide%20c7825824723445efa613f06eb9556e84:image22|{{AP%20Micro%20Study%20Guide%20c7825824723445efa613f06eb9556e84:image22.jpeg}}]]  * Firms may earn positive, negative, or zero economic profit in the short run.+[[AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84:image22|{{AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84:image22.jpeg}}]]  * Firms may earn positive, negative, or zero economic profit in the short run.
  
   * Typically use advertising as a means of differentiating product   * Typically use advertising as a means of differentiating product
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   * Profit maximization & produce/produce at loss/shut down rules apply the same way here as it does in other markets structures.   * Profit maximization & produce/produce at loss/shut down rules apply the same way here as it does in other markets structures.
  
-[[AP%20Micro%20Study%20Guide%20c7825824723445efa613f06eb9556e84:image23|{{AP%20Micro%20Study%20Guide%20c7825824723445efa613f06eb9556e84:image23.jpeg}}]]4.4.2 Long Run+[[AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84:image23|{{AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84:image23.jpeg}}]]4.4.2 Long Run
  
 > - Monopolistically competitive firms earn a normal (0) profit in the long run > - Monopolistically competitive firms earn a normal (0) profit in the long run
  
-[[AP%20Micro%20Study%20Guide%20c7825824723445efa613f06eb9556e84:image24|{{AP%20Micro%20Study%20Guide%20c7825824723445efa613f06eb9556e84:image24.jpeg}}]]> - Short run profits attract new firms to the industry, decreasing the demand for any singular firm’s product until the demand curve is tangent to LRATC. StudyResources AP Microeconomics Review Sheet. ​[[https://t.me/apresources|https://t.me/apresources]] In the long run, monopolistically competitive firms produce in a region where economies of scale exist because the firm produces in the declining portion of LRATC. +[[AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84:image24|{{AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84:image24.jpeg}}]]> - Short run profits attract new firms to the industry, decreasing the demand for any singular firm’s product until the demand curve is tangent to LRATC.  In the long run, monopolistically competitive firms produce in a region where economies of scale exist because the firm produces in the declining portion of LRATC. 
  
 4.5 Oligopoly and Game Theory 4.5 Oligopoly and Game Theory
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   * Payoff Matrix - represents the payoffs to each player for combinations of given strategies   * Payoff Matrix - represents the payoffs to each player for combinations of given strategies
  
-[[AP%20Micro%20Study%20Guide%20c7825824723445efa613f06eb9556e84:Untitled%201|{{AP%20Micro%20Study%20Guide%20c7825824723445efa613f06eb9556e84:Untitled%201.png}}]]> Payoff Matrix format:+[[AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84:Untitled_1|{{AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84:Untitled_1.png}}]]> Payoff Matrix format:
  
   * Dominant strategy - strategy that produces a better payoff for a player regardless of the strategy the opponent chooses.   * Dominant strategy - strategy that produces a better payoff for a player regardless of the strategy the opponent chooses.
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   * Nash Equilibrium - point where both players can do no better given the choice of their opponent.   * Nash Equilibrium - point where both players can do no better given the choice of their opponent.
  
-> StudyResources AP Microeconomics Review Sheet. ​https://t.me/apresources+> 
  
-5. Factor Markets+=====5. Factor Markets=====
  
 > 5.1 Introduction to Factor Markets > 5.1 Introduction to Factor Markets
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   * Perfect Competition:   * Perfect Competition:
  
-[[AP%20Micro%20Study%20Guide%20c7825824723445efa613f06eb9556e84:image26|{{AP%20Micro%20Study%20Guide%20c7825824723445efa613f06eb9556e84:image26.jpeg}}]]  * Monopsony is the market structure+[[AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84:image26|{{AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84:image26.jpeg}}]]  * Monopsony is the market structure
  
   * Monopsonist is the individual which has the following firm graph:   * Monopsonist is the individual which has the following firm graph:
  
-[[AP%20Micro%20Study%20Guide%20c7825824723445efa613f06eb9556e84:image28|{{AP%20Micro%20Study%20Guide%20c7825824723445efa613f06eb9556e84:image28.jpeg}}]]> StudyResources AP Microeconomics Review Sheet. ​https://t.me/apresources 5.2 Changes in Factor Demand and Factor Supply +[[AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84:image28|{{AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84:image28.jpeg}}]]>  5.2 Changes in Factor Demand and Factor Supply 
  
   * What shifts the demand for labor?   * What shifts the demand for labor?
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     * Any changes in the market wage will result in a shift of the firm’s MRC supply     * Any changes in the market wage will result in a shift of the firm’s MRC supply
     * The demand curve = marginal revenue product (MRP) of the firms workers and has a downward slope     * The demand curve = marginal revenue product (MRP) of the firms workers and has a downward slope
-  * [[AP%20Micro%20Study%20Guide%20c7825824723445efa613f06eb9556e84:Untitled%202|{{AP%20Micro%20Study%20Guide%20c7825824723445efa613f06eb9556e84:Untitled%202.png}}]] +  * [[AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84:Untitled_2|{{AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84:Untitled_2.png}}]] 
   * As changes occur in a firm’s worker productivity, demand for a firm’s products, and prices of said products (all change MRP), the demand curve will shift proportionally   * As changes occur in a firm’s worker productivity, demand for a firm’s products, and prices of said products (all change MRP), the demand curve will shift proportionally
  
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 > The graph on the left depicts a decrease in the supply of workers > The graph on the left depicts a decrease in the supply of workers
  
-[[AP%20Micro%20Study%20Guide%20c7825824723445efa613f06eb9556e84:image30|{{AP%20Micro%20Study%20Guide%20c7825824723445efa613f06eb9556e84:image30.jpeg}}]]> - Thus causing: [[AP%20Micro%20Study%20Guide%20c7825824723445efa613f06eb9556e84:Untitled%203|{{AP%20Micro%20Study%20Guide%20c7825824723445efa613f06eb9556e84:Untitled%203.png}}]] +[[AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84:image30|{{AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84:image30.jpeg}}]]> - Thus causing: [[AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84:Untitled_3|{{AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84:Untitled_3.png}}]] 
  
-> StudyResources AP Microeconomics Review Sheet. ​https://t.me/apresources+> 
  
-[[AP%20Micro%20Study%20Guide%20c7825824723445efa613f06eb9556e84:image31|{{AP%20Micro%20Study%20Guide%20c7825824723445efa613f06eb9556e84:image31.jpeg}}]]> Graph to the left: Increase in MRP for the firm’s laborers. Because of : better training for worker, implementation of new technology etc **→** the MRP shifts right and the firm hires more workers +[[AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84:image31|{{AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84:image31.jpeg}}]]> Graph to the left: Increase in MRP for the firm’s laborers. Because of : better training for worker, implementation of new technology etc **→** the MRP shifts right and the firm hires more workers 
  
   * Firms will hire workers as long as the MRP of the last worker that was hired is ≥ the cost of hiring that worker (MRC)   * Firms will hire workers as long as the MRP of the last worker that was hired is ≥ the cost of hiring that worker (MRC)
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   * Monopsonies hires workers when MRP = MRC   * Monopsonies hires workers when MRP = MRC
  
-> StudyResources AP Microeconomics Review Sheet. ​https://t.me/apresources+> 
  
-[[AP%20Micro%20Study%20Guide%20c7825824723445efa613f06eb9556e84:image33|{{AP%20Micro%20Study%20Guide%20c7825824723445efa613f06eb9556e84:image33.png}}]]Figure 1 Monopsony Graph Figure 2 Monopoly Graph+[[AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84:image33|{{AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84:image33.png}}]]Figure 1 Monopsony Graph Figure 2 Monopoly Graph
  
-MPL=∆Q/∆L+MPL=∆Q:∆L
  
-[[AP%20Micro%20Study%20Guide%20c7825824723445efa613f06eb9556e84:image34|{{AP%20Micro%20Study%20Guide%20c7825824723445efa613f06eb9556e84:image34.jpeg}}]]> StudyResources AP Microeconomics Review Sheet. ​https://t.me/apresources+[[AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84:image34|{{AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84:image34.jpeg}}]]> 
  
-Examples:+=====Examples:=====
  
 > 1.6: Marginal Analysis and Consumer Choice > 1.6: Marginal Analysis and Consumer Choice
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 FRQ Example (2016 #2): FRQ Example (2016 #2):
  
-[[AP%20Micro%20Study%20Guide%20c7825824723445efa613f06eb9556e84:image35|{{AP%20Micro%20Study%20Guide%20c7825824723445efa613f06eb9556e84:image35.png}}]]> StudyResources AP Microeconomics Review Sheet. ​https://t.me/apresources 2.3 Price Elasticity of Demand & 2.6 Market Equilibrium and CS / PS +[[AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84:image35|{{AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84:image35.png}}]]>  2.3 Price Elasticity of Demand & 2.6 Market Equilibrium and CS : PS 
  
 FRQ Example (2009 #2) FRQ Example (2009 #2)
  
-[[AP%20Micro%20Study%20Guide%20c7825824723445efa613f06eb9556e84:image36|{{AP%20Micro%20Study%20Guide%20c7825824723445efa613f06eb9556e84:image36.jpeg}}]]> 2.9 International Trade and Public Policy:+[[AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84:image36|{{AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84:image36.jpeg}}]]> 2.9 International Trade and Public Policy:
  
 FRQ Example (2012 #3): FRQ Example (2012 #3):
  
-[[AP%20Micro%20Study%20Guide%20c7825824723445efa613f06eb9556e84:image37|{{AP%20Micro%20Study%20Guide%20c7825824723445efa613f06eb9556e84:image37.png}}]]> StudyResources AP Microeconomics Review Sheet. ​https://t.me/apresources+[[AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84:image37|{{AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84:image37.png}}]]> 
  
-[[AP%20Micro%20Study%20Guide%20c7825824723445efa613f06eb9556e84:image38|{{AP%20Micro%20Study%20Guide%20c7825824723445efa613f06eb9556e84:image38.jpeg}}]]  - (i) Q = 6+[[AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84:image38|{{AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84:image38.jpeg}}]]  - (i) Q = 6
  
 > (ii) CS = ½ ($9 - $4) * (10 - 0) = $25 (iii) Tariff Revenue = (Tariff amount) * (Qimported) = ($4 - $2) * (10 - 6) = $8 ​ ​  > (ii) CS = ½ ($9 - $4) * (10 - 0) = $25 (iii) Tariff Revenue = (Tariff amount) * (Qimported) = ($4 - $2) * (10 - 6) = $8 ​ ​ 
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   - Any trade restriction is a deadweight loss, and will decrease the CS + PS sum (aka total surplus). So to maximize CS + PS (total surplus) there should be 0 tariffs, or a $0 per-unit tariff.   - Any trade restriction is a deadweight loss, and will decrease the CS + PS sum (aka total surplus). So to maximize CS + PS (total surplus) there should be 0 tariffs, or a $0 per-unit tariff.
  
-> StudyResources AP Microeconomics Review Sheet. ​https://t.me/apresources 3.5 Profit Maximization +>  3.5 Profit Maximization 
  
-[[AP%20Micro%20Study%20Guide%20c7825824723445efa613f06eb9556e84:image39|{{AP%20Micro%20Study%20Guide%20c7825824723445efa613f06eb9556e84:image39.jpeg}}]]> 3.6 Firms’ Short-Run Decisions to Produce and Long-Run Decisions to Enter or Exit a Market +[[AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84:image39|{{AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84:image39.jpeg}}]]> 3.6 Firms’ Short-Run Decisions to Produce and Long-Run Decisions to Enter or Exit a Market 
  
   * If a firm is currently producing 10 goods and their AFC is 10, their AVC is 13, and they can only sell their goods for $8, they should shut down in the short run.   * If a firm is currently producing 10 goods and their AFC is 10, their AVC is 13, and they can only sell their goods for $8, they should shut down in the short run.
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   * If they don’t produce any goods, they will not need any labor, so they will not pay any variable costs. However, they will still have to pay their fixed costs (since they are fixed in the short run and can only be changed in the long run). They will continue to pay $100 in fixed costs and will not earn any revenue, so their economic loss will be $100. They are better off not producing because they will have a lower economic loss.   * If they don’t produce any goods, they will not need any labor, so they will not pay any variable costs. However, they will still have to pay their fixed costs (since they are fixed in the short run and can only be changed in the long run). They will continue to pay $100 in fixed costs and will not earn any revenue, so their economic loss will be $100. They are better off not producing because they will have a lower economic loss.
  
-> StudyResources AP Microeconomics Review Sheet. ​https://t.me/apresources+> 
  
 4.5.2 Game Theory 4.5.2 Game Theory
  
-[[AP%20Micro%20Study%20Guide%20c7825824723445efa613f06eb9556e84:image40|{{AP%20Micro%20Study%20Guide%20c7825824723445efa613f06eb9556e84:image40.png}}]]> StudyResources AP Microeconomics Review Sheet. ​https://t.me/apresources+[[AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84:image40|{{AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84:image40.png}}]]> 
  
-[[AP%20Micro%20Study%20Guide%20c7825824723445efa613f06eb9556e84:image41|{{AP%20Micro%20Study%20Guide%20c7825824723445efa613f06eb9556e84:image41.jpeg}}]]  - Two oligopoly firms will cooperate where the total maximum revenue occurs at. For this example, this occurs when the two firms MAINTAIN / MAINTAIN.+[[AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84:image41|{{AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84:image41.jpeg}}]]  - Two oligopoly firms will cooperate where the total maximum revenue occurs at. For this example, this occurs when the two firms MAINTAIN : MAINTAIN.
  
 5.3 Profit-Maximizing Behavior in Perfectly Competitive Factor Markets 5.3 Profit-Maximizing Behavior in Perfectly Competitive Factor Markets
  
-  * EXAMPLE: Let’s say a company that makes 84 bananzos has production costs for all 84 bananzos it produces. The MRP is the cost of producing one additional unit. Let’s say that the cost of producing 100 units is $200, and the total cost of producing 101 units is $204. The average cost of producing 100 units is $2 (total cost/total units). However, for MRP, the marginal cost for producing unit #101 is $4 %%((%%$204-$200)%%/(%%101-100))+  * EXAMPLE: Let’s say a company that makes 84 bananzos has production costs for all 84 bananzos it produces. The MRP is the cost of producing one additional unit. Let’s say that the cost of producing 100 units is $200, and the total cost of producing 101 units is $204. The average cost of producing 100 units is $2 (total cost/total units). However, for MRP, the marginal cost for producing unit #101 is $4 %%((%%$204-$200)%%:(%%101-100))
     * In layman's terms it is found by dividing the change in production cost by the change in quantity     * In layman's terms it is found by dividing the change in production cost by the change in quantity
       * (new production cost - original production cost)%%/(%%new number of units - original number of units)       * (new production cost - original production cost)%%/(%%new number of units - original number of units)
  
-> StudyResources AP Microeconomics Review Sheet. ​https://t.me/apresources+> 
  
 5.4 Monopsonistic Markets 5.4 Monopsonistic Markets
  
-[[AP%20Micro%20Study%20Guide%20c7825824723445efa613f06eb9556e84:image42|{{AP%20Micro%20Study%20Guide%20c7825824723445efa613f06eb9556e84:image42.jpeg}}]]> a) MFC=MRP @ $Q_L$= 100 units b) Wage Rate = $10 (you need to go down to the supply curve at the Q where MFC=MRP) c) i) 200 units (S= MRP) ii) 150 units (where Minimum Wage Price Floor = $S_L$)+[[AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84:image42|{{AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84:image42.jpeg}}]]{{:pasted:20240411-025848.png}}
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