AP Microeconomics Review of Graphs and Models
You  need  to  know  how  to  draw,  label  and  interpret  all  of  the  graphs  below.  You  also  need  to  be  able  to   understand  how  shifts  will  change  the  graph.
1) Production  Possibility  Curve
Also  consider  how  the  PPC  can  shift  inward  and  outward
2) Supply  and  Demand
a) How  do  shifts  in  supply  and  demand  change  the  price  and  quantity?     b) How  can  you  calculate  revenue?   c) How  can  you  calculate  elasticity  from  this  graph?     d) How  can  you  calculate  consumer  and  producer  surplus  from  this  graph?     e) What  does  a  tax  look  like  on  the  supply  and  demand  graph  and  how  does  it  change  price  and   quantity?     f) What  do  price  controls  look  like  on  this  graph?   g) What  creates  dead-­‐weight  loss  on  this  graph?

3) Production  Function
A.
What  are  the  three  stages  of  returns?
B.
Why  does  diminishing  returns  occur?
4) Short  Run  Costs  Curves
a) What  does  each  curve  represent?     b) How  can  you  calculate  average  fixed  cost  at  a  given  quantity?     c) Why  does  marginal  cost  have  the  shape  that  it  does

5)  Long  Run  Costs  Curves   a) What  is  the  difference  between  economies  and  diseconomies  of  scale?   b) How  is  the  Long  Run  Average  Total  Cost  Curve  created?
6) Industry  and  Firm  in  Perfect  Competition
a) Why  is  Marginal  Revenue  equal  to  price  and  equal  to  demand  for  the  firm?     b) How  does  the  industry  set  the  price?   c) How  does  a  firm  choose  how  much  to  produce?   d) How  can  you  calculate  profit?     e) When  should  a  firm  shut  down  in  the  short  run?     f) When  should  a  firm  shut  down  in  the  long  run?     g) What  will  price  end  up  being  in  the  long  run?

7) Labor  Supply  and  Demand  (Industry  and  Firm)
a) What  are  shifters  of  labor  supply  and  demand?     b) How  does  the  supply  and  demand  of  labor  curves  relate  to  marginal  revenue  product   and  marginal  resource  cost?     c) At  what  point  will  a  firm  stop  employing  new  factors?
8) Monopoly
You  should  be  able:
Draw  the  above  graph   a) Determine  price  and  quantity  for  a  profit  maximizer   b) Determine  total  revenue,  total  cost,  profits  and  losses     c) Determine  consumer  surplus,  producer  surplus  and  dead  weight   d) Determine  the  quantity  and  revenue  for  a  perfect  price  discriminating  monopoly   e) Determine  the  socially  optimal  quantity   f) Determine  where  the  demand  curve  is  elastic,  inelastic  or    unit  elastic

9) Monopolistic  Competition
D
You  should  be  able:   a) Do  all  of  the  same  tasks  as  for  a  monopoly.   b) Determine  whether  this  is  a  short  run  or  long  run  graph   c) Determine  where  excess  capacity  exists     d) Determine  how  demand  shifts  if  there  are  short  run  profits  or  losses.
10) Externalities
Negative  Externalities
Positive  Externalities
a) What  are  examples  of  both  positive  and  negative  externalities?   b) Why  does  a  negative  externality  affect  the  costs  (supply  curve)  and  positive  externality  affect   the  benefits  (demand  curve)?   c) How  does  the  market  generated  quantity  and  price  differ  from  the  social  optimum?     d) What  deadweight  loss  is  created?      (Hint:  The  triangle  of  negative  DWL  points  towards  the   negative  number  line.  The  triangle  of  the  positive  DWL  points  towards  only  positive  numbers.)   e) How  can  a  PER-­‐UNIT  Pigouvian  tax  or  subsidy  correct  for  this  market  failure?   f) Why  doesn’t  a  lump-­‐sum  tax/subsidy  correct  for  this  market  failure?