AP Micro Economics
Cruel Spring Break Work
Directions: Create a review guide for what we have learned so far. Use these
questions as your guide. In other words, ALL of the following questions
MUST be answered in your review guide.
Basics:
1. Define:
a. Scarcity
b. Economics
c. Microeconomics
d. Macroeconomics
2. Draw a PPF graph of “guns” and “butter”
a. Illustrate on the graph
i. Unemployment of resources
ii. Short-Run unattainable combination
iii. Trade-Off
b. Why is the PPF curve bowed outward?
Supply & Demand
3. Define:
a. Law of Demand
b. Law of Supply
c. Shortage
d. Surplus
4. What are the basic determinants of Demand?
5. What are the basic determinants of Supply?
6. What is the difference between a change in QD and a change in D?
7. Draw 3 Supply and Demand Graphs for outputs
a. Illustrate on the 1st graph
i. Equilibrium
ii. Consumer Surplus
iii. Producer Surplus
b. Illustrate on the 2nd graph
i. An effective price floor
ii. Area of Consumer Surplus
iii. Area of producer surplus
c. Illustrate on the 3rd graph
i. An effective price ceiling
ii. Area of consumer surplus
iii. Area of producer surplus
8. Write the following equations & indicate the elasticity of each ‘test’:
a. Mid-Point Method of price elasticity
b. Total Revenue Test
c. Cross-Elasticity
d. Income-Elasticity
Utility
9. Define:
a. Utility
b. MU =
10. Explain the Utility Maximizing rule.
Profit
11. What is the difference between Accounting profit and economic profit?
12. If economic profit is zero, what is the accounting profit? Why?
Productivity & Cost
13. Complete the following Production equations:
a. AP =
b. MP =
14. Draw a graph depicting MP and AP
15. Define the following
a. Fixed Costs
b. Variable Costs
c. Short-Run
d. Long-Run
e. Law of Diminishing Marginal Returns
16. Complete the following cost equations:
a. TR =
b. MR =
c. TC =
d. MC =
e. ATC =
f. AFC =
g. AVC =
17. Draw a graph depicting MC, ATC, AVC, AFC
18. When MP reaches the point of diminishing returns, what point are we in the
MC curve?
19. When MP and AP intersect, what two cost curves also intersect at the same
output level?
Competition Structures
20. List the Perfectly competitive market structure’s characteristics.
21. Draw a 4 Perfectly competitive side-by-side output graphs:
a. Illustrate on the 1st graph long-run equilibrium
b. Illustrate on the 2nd graph short-run positive profit
c. Illustrate on the 3rd graph short-run loss
d. Illustrate on the 4th graph shut-down
22. Draw a perfectly competitive side-by-side output graph in short-run positive
profits
a. Do NOT shade area of profit, instead, show the changes that will occur
in the long-run
23. List the monopoly market structure’s characteristics.
24. Draw a Monopoly graph in illustrating the following:
a. Profit maximum quantity and price
b. Socially optimal quantity and price (equilibrium)
c. Revenue maximizing quantity and price
25. Draw a perfectly price discriminating monopoly graph that illustrates the
output quantity produced
26. List the monopolistically competitive market structure’s characteristics.
27. Draw a monopolistically competitive graph making short-run positive profit
a. What will happen to this firm in the long run?
b. Why?
28. List the oligopoly market structure’s characteristics.
29. Define the following terms related to an Oligopoly:
a. Interdependence
b. Collusion
c. Cartel
d. Game Theory
e. Nash Equilibrium
Factor Market
30. Draw a side-by-side perfectly competitive labor market graph that illustrates
a. Industry Wage and Quantity of Labor
b. Wage-Taker
c. Firm’s quantity of labor hired and the wage rate
31. In a perfectly competitive factor market, what determines the number of
workers to hire to reach profit maximization?
32. Draw a Monopsony labor graph that illustrates
a. Quantity hired
b. Wage rate
33. In a Monospony factor market, what determines the number of workers to
hire to reach profit maximization?
34. Identify the cost minimizing level of input combinations (cost minimizing
when more than 1 input is considered).