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ap_microeconomics [2024/04/11 00:55] – 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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         * Raw materials used to produce finished goods         * Raw materials used to produce finished goods
       * Labor (workers)       * Labor (workers)
-        * Human effort:work+        * Human effort/work
       * Capital (anything used to make anything else)       * Capital (anything used to make anything else)
         * finished goods used to produce other goods (machines, tools, factories, etc.)         * finished goods used to produce other goods (machines, tools, factories, etc.)
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   * Opportunity Cost: next-best alternative that you lost out on doing something else   * Opportunity Cost: next-best alternative that you lost out on doing something else
  
-  * Microeconomics: individuals:firms making decisions and how these interact+  * Microeconomics: individuals/firms making decisions and how these interact
     * e.g.: college vs job, car industry, etc     * e.g.: college vs job, car industry, etc
  
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   * Productive efficiency: lowest cost possible on PPC   * Productive efficiency: lowest cost possible on PPC
  
-  * Allocative efficiency: The economy allocates resources so that consumers are as well off as possible:producing what is demanded.+  * Allocative efficiency: The economy allocates resources so that consumers are as well off as possible/producing what is demanded.
  
   * Increasing Opportunity Costs: concave PPC   * Increasing Opportunity Costs: concave PPC
  
-  * 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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   * Quota: quantity control saying only x amount can be bought or sold   * Quota: quantity control saying only x amount can be bought or sold
  
-  * License: gives owner right to supply good:service+  * License: gives owner right to supply good/service
  
   * Demand price: price at which given quantity is demanded   * Demand price: price at which given quantity is demanded
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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
-    * 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.
  
-> 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=====
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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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   * 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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     * 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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   - Allocative Efficiency: they produce the optimal quantity that the society wants (P=MC).   - Allocative Efficiency: they produce the optimal quantity that the society wants (P=MC).
  
-> Short-Run vs. Long-Run Production: Short-run: Fixed no. of firms Long-Run: with entry:exit (assuming no barriers to entry) +> Short-Run vs. Long-Run Production: Short-run: Fixed no. of firms Long-Run: with entry/exit (assuming no barriers to entry) 
  
   * Firms will make zero economic profit   * Firms will make zero economic profit
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     * Low barriers to enter and exit the market     * Low barriers to enter and exit the market
     * No advertisements     * No advertisements
-    * Firms are ‘Price Takers’, No control over price:market power+    * Firms are ‘Price Takers’, No control over price/market power
     * No economic profit in the long run (which is why we say you have normal profit when you have 0 profit)     * No economic profit in the long run (which is why we say you have normal profit when you have 0 profit)
  
 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. ​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):
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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}}]]> 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=====
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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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 [[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
  
-> StudyResources AP Microeconomics Review Sheet. ​https:::t.me:apresources+> 
  
 4.4 Monopolistic Competition 4.4 Monopolistic Competition
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   * Demand curve is downward sloping (market power) but is more elastic than the monopoly demand curve.   * Demand curve is downward sloping (market power) but is more elastic than the monopoly demand curve.
  
-  * 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_Micro_Study_Guide_c7825824723445efa613f06eb9556e84:image23|{{AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84: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
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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=====
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   * The four factor payments are: Rent, wage, interest, and profit.   * The four factor payments are: Rent, wage, interest, and profit.
  
-  * Marginal revenue product (MRP): The additional revenue generated by an additional resource:worker (measured in dollars).+  * Marginal revenue product (MRP): The additional revenue generated by an additional resource/worker (measured in dollars).
  
-  * Marginal factor cost (MFC): The additional cost of an additional resource:worker.+  * Marginal factor cost (MFC): The additional cost of an additional resource/worker.
     * Also called marginal resource cost (MRC)     * Also called marginal resource cost (MRC)
     * Also called Wage     * Also called Wage
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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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   * What shifts the supply for labor?   * What shifts the supply for labor?
     * Number of qualified workers (immigration)     * Number of qualified workers (immigration)
-    * Government regulation:licensing+    * Government regulation/licensing
     * Cultural expectations     * Cultural expectations
  
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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}}]] 
  
-> StudyResources AP Microeconomics Review Sheet. ​https:::t.me:apresources+> 
  
 [[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
  
-> StudyResources AP Microeconomics Review Sheet. ​https:::t.me:apresources+> 
  
 [[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.
  
-> StudyResources AP Microeconomics Review Sheet. ​https:::t.me:apresources 3.5 Profit Maximization +>  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.
  
-> StudyResources AP Microeconomics Review Sheet. ​https:::t.me:apresources+> 
  
 4.5.2 Game Theory 4.5.2 Game Theory
  
-[[AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84:image40|{{AP_Micro_Study_Guide_c7825824723445efa613f06eb9556e84: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_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.
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 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_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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