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ap_microeconomics [2024/04/11 00:54] – mrdoughap_microeconomics [2024/04/20 05:37] (current) – external edit 127.0.0.1
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     * Causes us to make choices     * Causes us to make choices
  
-  * Free goods: goods with no-cost:unlimited supply (e.g.: sunlight)+  * Free goods: goods with no-cost/unlimited supply (e.g.: sunlight)
  
   * Positive statement: factual statement   * Positive statement: factual statement
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   * Economic Growth: allows sustained rise in aggregate output/expansion of PPC outwards   * Economic Growth: allows sustained rise in aggregate output/expansion of PPC outwards
     * Causes:     * Causes:
-      * increase//development in technology+      * increase/development in technology
       * Increase in resources       * Increase in resources
  
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     * Inverse is true: if price that something’s being sold at is low, producers want to produce less of it     * Inverse is true: if price that something’s being sold at is low, producers want to produce less of it
  
-  * 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_Micro_Study_Guide_c7825824723445efa613f06eb9556e84:image2|{{AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84: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
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 [[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  [[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_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) [[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)
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   * Supply price: price at which given quantity is supplied   * Supply price: price at which given quantity is supplied
 +
 +> 
  
   * Transactions   * Transactions
-    * Transactions of good:service+    * Transactions of good/service
     * Transaction of license     * Transaction of license
  
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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.
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 +> 
  
 =====3. Production, Cost, and the Perfect Competition Model===== =====3. Production, Cost, and the Perfect Competition Model=====
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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.
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 +> 
  
   * 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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   * 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
 +
 +> 
  
   * 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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   * 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
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 +> 
  
 3.6.2 Long Run 3.6.2 Long Run
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 Case 1: Normal Profit: Case 1: Normal Profit:
  
-[[AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84:image15|{{AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84:image15.jpeg}}]]> StudyResources AP Microeconomics Review Sheet.+[[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):
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 [[AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84:image17|{{AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84:image17.jpeg}}]]Example with curves shifting: [[AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84:image17|{{AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84:image17.jpeg}}]]Example with curves shifting:
  
-[[AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84:image18|{{AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84:image18.jpeg}}]]+[[AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84:image18|{{AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84:image18.jpeg}}]]> 
  
 =====4. Imperfect Competition===== =====4. Imperfect Competition=====
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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.
 +
 +> 
  
 4.2 Monopoly 4.2 Monopoly
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 [[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 [[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
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 +> 
  
 4.4 Monopolistic Competition 4.4 Monopolistic Competition
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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.
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 +> 
  
 =====5. Factor Markets===== =====5. Factor Markets=====
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   * Monopsonist is the individual which has the following firm graph:   * Monopsonist is the individual which has the following firm graph:
  
-[[AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84:image28|{{AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84: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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 [[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}}]]  [[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}}]] 
  
 +> 
  
 [[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  [[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 
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   * Monopsonies hires workers when MRP = MRC   * Monopsonies hires workers when MRP = MRC
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 +> 
  
 [[AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84:image33|{{AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84: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
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 MPL=∆Q:∆L MPL=∆Q:∆L
  
-[[AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84:image34|{{AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84: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:=====
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 FRQ Example (2016 #2): FRQ Example (2016 #2):
  
-[[AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84:image35|{{AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84: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)
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 FRQ Example (2012 #3): FRQ Example (2012 #3):
  
-[[AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84:image37|{{AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84: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_Micro_Study_Guide_c7825824723445efa613f06eb9556e84:image38|{{AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84:image38.jpeg}}]]  - (i) Q = 6 [[AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84:image38|{{AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84:image38.jpeg}}]]  - (i) Q = 6
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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.
 +
 +>  3.5 Profit Maximization 
  
 [[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  [[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 
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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.
  
 +> 
  
 4.5.2 Game Theory 4.5.2 Game Theory
  
-[[AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84:image40|{{AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84:image40.png}}]]+[[AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84:image40|{{AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84:image40.png}}]]> 
  
-[[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.+[[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
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       * (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_Micro_Study_Guide_c7825824723445efa613f06eb9556e84:image42|{{AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84: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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