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AP Microeconomics

Study Notes
1.1.1 Definition and Causes of Scarcity
1.1.2 Factors of Production and Scarcity
1.1.3 Trade-Offs and Opportunity Costs
1.2.1 Resource Allocation and the Three Basic Economic Questions
1.2.2 Types of Economic Systems
1.2.3 Institutional Arrangements and Coordinating Mechanisms
1.2.4 Advantages and Limitations of Economic Systems
1.3.1 Definition and Purpose of the PPC
1.3.2 Concepts Illustrated by the PPC
1.3.3 Calculating Opportunity Cost Using the PPC
1.3.4 Shape of the PPC and Opportunity Costs
1.3.5 Factors That Cause Shifts in the PPC
1.3.6 Economic Growth and the PPC
1.4.1 Definition of Absolute and Comparative Advantage
1.4.2 Determining Absolute and Comparative Advantage
1.4.3 Specialization and Gains from Trade
1.4.4 Mutually Beneficial Terms of Trade
1.4.5 Comparative Advantage vs. Absolute Advantage in Trade Decisions
1.5.1 Definition and Role of Opportunity Cost
1.5.2 Calculating Opportunity Costs
1.5.3 Measuring Total Benefits and Costs
1.5.4 Decision-Making Using Cost-Benefit Analysis
1.5.5 Marginal vs. Total Analysis in Decision-Making
1.5.6 Optimal Choice and Maximizing Total Net Benefits
1.6.1 Assumptions of Consumer Choice Theory
1.6.2 Utility and Diminishing Marginal Utility
1.6.3 Marginal Utility per Dollar and Optimal Consumer Choice
1.6.4 Definition and Principles of Marginal Analysis
1.6.5 Marginal Analysis in Decision-Making
1.6.6 Sunk Costs and Their Irrelevance in Marginal Analysis
1.6.7 Total and Marginal Benefit Comparison
2.1.1 Definition of Demand and the Law of Demand
2.1.2 Determinants of Demand and Demand Curve Shifts
2.1.3 Income and Substitution Effects
2.1.4 Diminishing Marginal Utility and the Law of Demand
2.1.5 Market Demand Curve and Its Derivation
2.1.6 Incentives and Constraints in Consumer Behavior
2.1.7 Property Rights and Market Functionality
2.2.1 Definition of Supply and the Law of Supply
2.2.2 Market Supply Curve and Its Derivation
2.2.3 Movement Along vs. Shifts of the Supply Curve
2.2.4 Determinants of Supply
2.2.5 Producer Responses to Incentives and Technology
2.3.1 Definition of Elasticity and Types of Elasticity
2.3.2 Measuring Price Elasticity of Demand
2.3.3 Ranges of Elasticity
2.3.4 Determinants of Price Elasticity of Demand
2.3.5 Elasticity and Total Revenue
2.3.6 Calculating Elasticity Using Data
2.3.7 Applications of Elasticity
2.4.1 Definition of Price Elasticity of Supply (PES)
2.4.2 Ranges of Elasticity of Supply
2.4.3 Determinants of Price Elasticity of Supply
2.4.4 Measuring and Calculating PES
2.4.5 Applications of PES in Decision-Making
2.5.1 Definition of Elasticity Beyond Price
2.5.2 Income Elasticity of Demand (IED)
2.5.3 Cross-Price Elasticity of Demand (XED)
2.5.4 Applications of Income and Cross-Price Elasticity
2.6.1 Definition of Market Equilibrium
2.6.2 Shifts in Supply and Demand and Their Impact on Equilibrium
2.6.3 Consumer Surplus
2.6.4 Producer Surplus
2.6.5 Total Economic Surplus and Market Efficiency
2.6.6 Importance of Equilibrium Price in Resource Allocation
2.6.7 Applications of Surplus Concepts in Policy and Welfare Analysis
2.7.1 Definition of Surplus and Shortage
2.7.2 Causes of Market Disequilibrium
2.7.3 Adjustments Toward Market Equilibrium
2.7.4 Impact of Market Changes on Surplus and Price
2.7.5 Calculating Changes in Consumer and Producer Surplus
2.7.6 Total Economic Surplus and Market Efficiency
2.8.1 Forms of Government Price and Quantity Interventions
2.8.2 Taxes and Subsidies
2.8.3 Impact on Consumer and Producer Behavior
2.8.4 Deadweight Loss and Allocative Efficiency
2.8.5 Incidence of Taxes and Subsidies
2.8.6 Government Revenue and Costs
2.9.1 Definition of Tariffs and Quotas
2.9.2 Effects of International Trade on Markets
2.9.3 Impact of Tariffs on Market Outcomes
2.9.4 Impact of Quotas on Market Outcomes
2.9.5 Policy Implications of International Trade
3.1.1 Definition of the Production Function
3.1.2 Marginal Product (MP) and Average Product (AP)
3.1.3 Total Product (TP) Curve and Its Stages
3.1.4 Law of Diminishing Marginal Returns
3.1.5 Productivity Measures in the Short Run and Long Run
3.1.6 Calculating Productivity Metrics
3.2.1 Fixed, Variable, and Total Costs
3.2.2 Average and Marginal Costs
3.2.3 Diminishing Marginal Returns and the MC Curve
3.2.4 Specialization and Division of Labor
3.2.5 Shifting Cost Curves
3.2.6 Calculating Short-Run Costs
3.3.1 Introduction to Long-Run Costs
3.3.2 Long-Run Average Total Cost (LRATC) Curve
3.3.3 Economies and Diseconomies of Scale
3.3.4 Minimum Efficient Scale (MES) and Industry Structure
3.3.5 Long-Run Costs and Strategic Decision-Making
3.4.1 Definition of Accounting and Economic Profit
3.4.2 Normal Profit and Its Role in Business Decisions
3.4.3 How Firms Respond to Profit Opportunities
3.4.4 Calculating Profit and Loss
3.5.1 The Profit-Maximizing Rule
3.5.2 Marginal Revenue and Marginal Cost
3.5.3 Identifying the Profit-Maximizing Output Level
3.5.4 Total Revenue, Total Cost, and Profit Maximization
3.5.5 Implications of Profit Maximization
3.6.1 Short-Run Decisions: Operate or Shut Dow
3.6.2 Long-Run Decisions: Enter or Exit a Market
3.6.3 Market Adjustment in the Long Run
3.6.4 Economic Implications of Entry and Exit
3.7.1 Characteristics of Perfect Competition
3.7.2 Short-Run Decision-Making in Perfect Competition
3.7.3 Long-Run Equilibrium in Perfect Competition
3.7.4 Allocative Efficiency and Productive Efficiency
3.7.5 Market Dynamics: Cost Industry Types
3.7.6 Price and Market Efficiency
3.7.7 Short-Run vs. Long-Run Market Outcomes
4.1.1 Characteristics of Imperfectly Competitive Markets
4.1.2 Price Setting and Quantity Decisions
4.1.3 Inefficiency in Imperfect Competition
4.1.4 Barriers to Entry
4.1.5 Comparison with Perfect Competition
4.2.1 Definition and Characteristics of Monopoly
4.2.2 Barriers to Entry
4.2.3 Profit Maximization in Monopoly
4.2.4 Consumer Surplus, Producer Surplus, and Deadweight Loss in Monopoly
4.2.5 Natural Monopoly
4.2.6 Inefficiency and Regulatory Implications
4.3.1 Definition and Conditions for Price Discrimination
4.3.2 Types of Price Discrimination
4.3.3 Impact of Price Discrimination on Surplus and Efficiency
4.3.4 Calculations of Surplus, Profit, and Deadweight Loss
4.3.5 Policy Implications and Ethical Considerations
4.4.1 Characteristics of Monopolistic Competition
4.4.2 Short-Run Equilibrium
4.4.3 Long-Run Equilibrium
4.4.4 Inefficiency in Monopolistic Competition
4.4.5 Advertising and Non-Price Competition
4.4.6 Comparison with Other Market Structures
4.5.1 Characteristics of Oligopoly
4.5.2 Collusion and Cartels
4.5.3 Game Theory Basics
4.5.4 Dominant Strategy and Nash Equilibrium
4.5.5 Strategic Behavior and Market Outcomes
4.5.6 Calculations and Incentives in Game Theory
5.1.1 Definition and Types of Factor Markets
5.1.2 Relationship Between Factors of Production, Firms, and Factor Prices
5.1.3 Demand for Labor and Wage Determination
5.1.4 Marginal Revenue Product (MRP) and Marginal Resource Cost (MRC)
5.1.5 Market Dynamics and Shifts in Factor Demand and Supply
5.2.1 Determinants of Labor Demand
5.2.2 Determinants of Labor Supply
5.2.3 Firms’ and Factors’ Responses to Changes in Labor Markets
5.2.4 Graphical and Numerical Analysis
5.3.1 Characteristics of Perfectly Competitive Factor Markets
5.3.2 Profit Maximization in Perfectly Competitive Labor Markets
5.3.3 Calculation of Profit-Maximizing Labor
5.3.4 Cost Minimization and Input Allocation
5.3.5 Relationship Between Factor and Output Markets
5.3.6 Graphical and Numerical Analysis
5.4.1 Characteristics of Monopsonistic Markets
5.4.2 Profit-Maximizing Behavior in Monopsonistic Markets
5.4.3 Calculations in Monopsonistic Markets
5.4.4 Inefficiency in Monopsonistic Markets
5.4.5 Policy Responses to Monopsony
6.1.1 Definition of Social Efficiency
6.1.2 Social Efficiency in Perfectly Competitive Markets
6.1.3 Causes of Socially Inefficient Market Outcomes
6.1.4 Private Incentives and Inefficient Market Outcomes
6.1.5 Policy Responses to Market Inefficiency
6.1.6 Deadweight Loss and Inefficiency Calculations
6.1.7 Equilibrium Allocations in Imperfect Markets
6.2.1 Definition and Types of Externalities
6.2.2 Social vs. Private Costs and Benefits
6.2.3 Causes of Externalities
6.2.4 Incentives and Free-Rider Problems
6.2.5 Public Policies to Address Externalities
6.2.6 Graphical and Numerical Analysis
6.3.1 Characteristics of Goods: Rivalry and Excludability
6.3.2 Free Rider Problem and Public Goods
6.3.3 Government Provision of Goods
6.3.4 Common Resources and Overconsumption
6.3.5 Policy Solutions to Public and Common Resource Problems
6.4.1 Types of Government Policy Interventions
6.4.2 Per-Unit Taxes and Subsidies
6.4.3 Lump-Sum Taxes and Subsidies
6.4.4 Binding Price Ceilings and Floors
6.4.5 Corrective Policies for Market Failures
6.4.6 Natural Monopolies and Allocative Efficiency
6.4.7 Antitrust Policies
6.5.1 Measures of Economic Inequality
6.5.2 Variation in Income and Poverty Rates
6.5.3 Sources of Income and Wealth Inequality
6.5.4 Policy Responses to Economic Inequality

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