5
™
5 STEPS TO A
AP Microeconomics
TEACHER’S MANUAL
Matt Pedlow
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Copyright © 2013 by McGraw-Hill Education. All rights reserved.
ISBN: 978-0-07-180320-5
MHID:
0-07-180320-3
AP, Advanced Placement Program, and College Board are registered trademarks of the College Entrance Examination Board,
which was not involved in the production of, and does not endorse, this product.
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Introduction
5 Steps to a 5: AP Microeconomics will be very helpful to your AP students no matter
which AP textbook you are currently using. It is closely aligned with the Advanced
Placement Microeconomics curriculum, so you can be assured that it will complement
any instructional style. There are many ways to integrate the material in 5 Steps to a 5
into your classroom program. You can use it in class to assist in instruction, or you can
have your students use it outside the classroom to further their learning. In addition,
5 Steps to a 5: AP Microeconomics can help you prepare your syllabus and curriculum.
Teaching the Course
Course Structure
The structure of individual AP classes may vary widely because of many different internal and external factors. These include, but are not limited to, the following:
• The use of technology in the school. Some schools will have very limited technology in
their classrooms. For example, some have only chalkboards or a few desktop computers. In these schools, the impact of any technology will be limited. Other schools
may have smartboards, iPads, or laptops for each student, or even computer labs that
can be easily accessed. In these schools, students can make full use of technology,
including the great websites that have been created for AP students. The availability
of technology will determine how well students are able to access these sites.
• The number of students in the class. This too is typically a district policy that is beyond
the teacher’s control. Some schools limit AP classes to 20 to 25 students, while others
allow more than 40 students per classroom. Although a small class can provide many
advantages in terms of how the material is presented, there are certain simulations
throughout the year that are possible when the class is larger, such as a market trading
game or even grading free-response questions together. With a larger class, students
have more examples to review and see how their peers are answering specific questions.
• The adoption of specific textbooks. A number of Advanced Placement Microeconomics textbooks are available, and it is usually up to teachers to choose which text is
best suited for their students. If teachers are just beginning to teach AP Microeconomics, the textbook may have already been chosen for them by their department or
the administration. However, if this isn’t the case and teachers have time to review
textbooks, they should definitely consult the College Board’s online AP Teacher
Community Forums. There, new teachers can talk to veteran AP teachers before
purchasing an AP Microeconomics textbook.
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• How many weeks the course runs. Depending on how the school schedules its courses,
teachers may teach their students anywhere from 11 to 13 weeks if they are in a trimester format, or 18 to 21 weeks if the school has two semesters. Teachers should
find that, depending on the number of hours per class, it will typically take most of
the trimester or semester to get through the material, but they should plan to keep at
least one week for review prior to the test. One concern that many teachers who are
teaching AP Microeconomics in the spring have is not having enough time to cover
all the material. In this case, teachers have sometimes been advised to make sure to
teach the most important topics and only briefly introduce some of the principles
that aren’t often tested.
• When the course is offered. Some teachers may teach AP Microeconomics only in the
fall, and others only in the spring. Sometimes it is taught in the fall and then followed by AP Macroeconomics, and other times AP Macroeconomics is taught first.
Regardless of when the course is taught, teachers will need to have time to review the
material with students prior to the AP exam in May. Teachers who teach the course
only during the fall semester or trimester may not have any interaction with their
students for a long period of time, and this can be problematic, since the AP exam
is given in May. If you are in this situation, check the planning guide in Chapter 2
of the book for suggestions about how to keep students engaged during that period.
Using 5 Steps to a 5 and having review sessions will ensure that the students are
reviewing the material and staying focused prior to the test.
Prerequisites
Whether or not departments require prerequisites is typically a matter of school policy.
Some schools allow only seniors to take AP Microeconomics, while others allow any
high school student to take the course. Some school districts have no prerequisites,
while others require basic math classes and some even require advanced math classes.
There are two basic philosophies about having prerequisites for Advanced Placement classes:
• Teachers who advocate for no prerequisites often state that AP classes should be
open to any student who chooses to enroll in such a high-level class. If a student is
willing to do the work, prepare for the AP exam, and keep up with the advanced
pacing that is typical of most AP classrooms, then that student should be allowed
to take the class.
• Teachers who support having prerequisites typically feel that students need a certain level of basic knowledge in order to be successful in an AP classroom. For AP
Microeconomics, the prerequisite is usually specific math classes like algebra. Some
schools even require precalculus.
No matter which philosophy your school district follows, the College Board
states that students need only be proficient in basic math in order to be successful in
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AP Microeconomics. Recent AP Microeconomics exams have included basic geometry
(e.g., computing the size of a triangle) and simple computations (e.g., division and multiplication). Practicing these basic mathematical operations is important, but teachers and
students should be aware that students are not allowed to use calculators on the AP exam.
One way to ensure that students are proficient at the required level of math is to either
provide a math and graphing review or suggest that students have completed algebra.
Length of Term
The structure of the AP Microeconomics course also varies depending on the structure
of the school term. If the school year is divided into two semesters, you may teach AP
Microeconomics in one semester and AP Macroeconomics in the other. If the school
year is divided into trimesters, you may teach AP Microeconomics in one trimester or
in one and a half trimesters and AP Macroeconomics in the balance of the year. If you
teach in a block schedule format, you may see your students every other day for up to
90 minutes. No matter what schedule the district follows, you need to make sure that
your students are taught and understand all the concepts. There are sample syllabi at the
College Board website that show a number of different plans to teach all of the material. They can be found at http://www.collegeboard.com/html/apcourseaudit/courses/
microeconomics.html.
Setting Expectations for the AP Classroom
Students should know on the first day of class what the typical AP class entails. You
should clearly discuss the following:
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The amount of homework or work outside the classroom
The type of homework that will be given, if it will be graded, and how it will be graded
How quizzes and tests will be administered
The amount of reading expected from each student
The pace of the class
The technology or websites that are required throughout the class
Getting Started with 5 Steps to a 5:
AP Microeconomics
Step 1: What Students Need to Know About the Exam
(Chapter 1)
Give your students a concise overview of the AP Microeconomics exam by having them
read Chapter 1. They will learn about the exam format, see an outline of the topics
tested, find out about scoring, and get practical details about what happens on test day.
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Students should be aware that the multiple-choice portion of the test accounts for
two-thirds of their grade, and the free-response portion makes up the other one-third.
Stress to students that there is no penalty for guessing on a multiple-choice question, and therefore they should answer every multiple-choice question. They should
never leave a question blank, as they may be able to guess correctly. Also, whenever students are taking practice tests, it’s a wise idea to give them about five minutes less than
they will have on their AP exam date. This way, they will get into the habit of taking
a few minutes at the end of the test to go back and review any questions that they may
have had difficulty with.
Helping Students Manage Time (Chapter 2)
Chapter 2 offers three different study plans: a full school year, one semester, and six
weeks. These plans are designed to help students make the best use of their time in
the months and weeks remaining before the test. The plans can also help you to direct
students’ studies and monitor their progress. For some students, you may want to
choose the most appropriate plan and ask the students to follow its directives. You can
also use the plans to check on where students are in their study schedules. The plans
list specific benchmarks and “to-do” items, and you can have students check them off
as they complete them. Many of the listed activities can be completed during a typical
class or during the last few minutes of a class. For example, during class time, you might
ask students to complete the review questions at the end of the unit they are studying.
This will take only five minutes, but it will give you a clear understanding of whether
or not students have mastered the material.
Step 2: Using the Diagnostic Test (Chapter 3)
Have students take the Diagnostic Test in Chapter 3 near the end of your AP
Microeconomics course, when they are about to start their final exam preparation. The
test will help them identify their strengths and weaknesses, and allow them to focus
their studies. The test can also enable you to decide which topics to focus on in class
during the final review. By grading students’ tests on a Scantron machine or other data
program, you can find out which questions were most often answered incorrectly. You
can then allocate class time to reviewing those particular topics.
Step 3: Teaching Test-Taking Strategies (Chapter 4)
Multiple-Choice Portion: What Do Students Need to Know?
Chapter 4 explains how the multiple-choice questions on the AP Microeconomics exam
are written and provides useful strategies for answering them. Although most students
in an AP classroom will have taken many multiple-choice tests prior to the AP exam,
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they should still find this information useful. Throughout the course, as students take
practice tests, it is helpful to ask them to review individual questions and tell why they
picked the answer they did. Out of the five answers, there are typically one or two
that don’t make sense, so students should eliminate those answers immediately. Out of
the remaining three, one of the answers will sound less applicable than the other two.
Students can now choose between the two best answers and hopefully use economic
reasoning to get the correct answer.
It is also often useful to divide students into small groups and have them discuss
with one another how they chose their answers on previous multiple-choice tests. This
activity helps students strengthen their ability to spot correct answers and eliminate
incorrect ones. It also allows students to discuss with one another why the incorrect
answers are wrong and helps reinforce their knowledge of microeconomics.
Free-Response Section: How Many Questions Are There
and How Are They Scored?
Chapter 4 also discusses how best to tackle the free-response section. As this section
accounts for one-third of a student’s grade, students need to be proficient at answering
these questions. The AP Microeconomics exam includes three free-response questions,
with the first question making up 50 percent of the free-response grade. The freeresponse questions are graded by groups of high school AP Microeconomics teachers
and college economics professors.
Chapter 4 gives students useful tips and strategies for answering free-response questions. Experienced graders would probably agree that the first tip is the most important:
Easy to Read = Easy to Grade. It is important to stress this point to your students.
Those who struggle with penmanship or have difficulty drawing a straight line for a
graph are at risk of losing points because their answers are impossible to read. You can
help students avoid this problem by having them practice graphing and writing out
their responses so that other students can easily grade them. There are a number of
ways to do this. Some teachers use posters and have the students draw large, easy-toread graphs. Other teachers have the students draw outside on the sidewalks with chalk.
A tip that is often given is to have students use an extra pencil as a straightedge on the
test whenever they are drawing graphs. This will ensure that the graphs will be easier
to read.
Teaching students about consistency is important as you begin giving the students
past free-response questions. It’s important for students to know that they need to be
consistent in their answers. Even if their first point is wrong, students can get the rest of
the points correct if they stay consistent in their reasoning. A phrase like “according to
your answer to C ii” means that the student may get consistency points even if answer
to C ii was wrong.
It is critical to teach students the difference among words like indicate, describe,
show, and explain. Students often miss points because they don’t explain when they
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need to, or because they incorrectly explain why something happened when they should
have just said that it happened.
Teaching Students to Become “AP Readers”
Many AP Microeconomics teachers have found that a good strategy to help students
do well on the free-response portion is to teach them to become “AP readers.” In
many AP Economics classrooms, students routinely grade other students’ work on
the free-response questions. This is useful because it enables students to both study
correct responses and learn to identify responses in which elements are missing. It
also allows students to more fully comprehend what real AP readers are looking for
and gives them an opportunity to critique other students’ handwriting and graphing
ability.
By the end of the term, students often attempt to “point” each question, that is, to
determine not only how many points the question is worth, but also how each point is
assigned. That knowledge will help students avoid losing points on exam day.
Step 4: Microeconomics Content Review (Chapters 5–11)
Creative Lessons on Each Major Theme
As you begin to teach the AP Microeconomics course, it is helpful to use as many
creative lessons as possible. This will help students maintain an interest in the course,
and will also allow you to reinforce the economic principles you are currently covering. There are a number of different books that have creative lessons, games, and
simulations for the economics classroom. In addition, it would be very helpful to
register for the AP Teacher Community at https://apcommunity.collegeboard.org/.
Once you create a username and password, you will be able to communicate with
other teachers and college professors. Teachers can post questions about anything
related to AP Microeconomics and receive valuable input from teachers all over the
world. They can also post lessons and activities that worked well for them. This is a
great way for teachers to share lessons, offer advice on textbook selection, and discuss
the various ways to teach specific items.
There are creative ways to teach almost all of the fundamentals of economics.
Some of these involve using games, while others involve classroom discussion. No matter which activity teachers choose to reinforce the concepts, it is highly recommended
that students attempt the review questions at the end of each chapter. Students might
want to keep a “learning log” for each chapter. They can log their progress in a number
of different ways. For instance, in their notes, students can keep logs for each chapter
that detail what they learned, what they need to review, and how they did on each
review. Or, students can simply write how they did in 5 Steps to a 5 on each page that
has review questions. Putting a star next to each question they missed will ensure that
they can easily go back and review to make certain that they clearly understand the
material.
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Chapter 5: Fundamentals of Economic Analysis
Scarcity/Trade-Offs/Opportunity Cost
There are a number of ways to teach about scarcity, whether it is a discussion of what
resources are scarce around the world or a discussion about what is scarce in students’
lives. (Sleep and money usually rank one and two!) However, a fun way to introduce
students to the idea of scarcity can be done on the first day of the class. Depending on
how many students are enrolled, take a few desks out of the classroom and hide them.
As the students file into the classroom, be sure they know that there is no seating chart,
so they can sit wherever they would like. As the classroom fills up, there are going to
be a few students left standing. It would be helpful to not get involved and see if the
students can figure out any solution on their own. For example, one student may give
up his or her seat to another, students may share a seat, or students may choose to sit
on the floor. Once class begins, you can immediately begin discussing scarcity without
students realizing that you are teaching them an important economic concept. Ask the
class questions such as:
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Who got the seats, and why did they get them?
Was it important to get to class early?
Why are certain students not seated at desks?
What solutions did students come up with?
Did these solutions solve the problem of scarcity?
What could be done in the future to ensure that all students have desks?
Once the discussion ends, you can bring in the “missing desks” and move into the
discussion of scarcity. Not only will students remember what scarcity is, but this will
allow you to begin teaching on day one an important concept that they will have to
know for the AP Microeconomics exam.
Trade-offs can also be taught using this lesson. Students will understand the tradeoffs they made as they entered class. They may have asked themselves: Where should
I sit? Should I give up my seat? Whom should I sit near?
The discussion will then lead to opportunity cost. Students should be made aware
that they made choices, and that every choice has an opportunity cost. For students
who were late to class and ended up without a desk, this concept will probably become
evident very quickly. For students who gave up their seats and sat on the floor, the
opportunity cost might be the comfort of sitting at a desk.
Marginal Analysis
One of the most important concepts students will need to comprehend is the idea of
making decisions at the margin. For students in high school, who are often involved in
numerous extracurricular activities, marginal analysis can be taught using the idea of
deciding how long to study, train, or practice. If a student is running to get in shape
for a sport or practicing a musical instrument, that student is already using this idea
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without realizing it. She or he is basing the decision about how long to practice or train
on what additional benefit and additional cost will result from continuing. You can
also tell students to use marginal analysis when studying for AP Microeconomics. If
the additional benefit of studying is greater than the additional cost, then they should
continue studying. An important concept in economics is that marginal benefits fall
and marginal costs rise as more of a good is consumed. As the student devotes more and
more time to “consuming” her studies, eventually the marginal cost will be higher than
the marginal benefit, so the student should stop studying when the marginal cost and
marginal benefit equal each other. Students love being told that there is an economic
rationale for stopping studying!
Functions of Economic Systems
Students should be taught the major differences between economic systems. Although
much of the world is moving toward a more capitalist approach, it is helpful to know the
main features of a command economic system, a market system, a traditional system,
and a mixed economic system. A number of helpful simulations are available online.
One example is the Bead Game Simulation by Ken Ripp. It can be found at http://bradleyhardin.com/economics/systems/bead_game_simulation.htm. In this simulation,
students are divided into three groups and given detailed instructions on how to make
either rings, bracelets, or necklaces. After completing the task in a given period of time,
each group moves on to the next task until all three groups have created all three items.
Teachers will need to have beads, string, and scissors on hand, but this is a great way
for students to understand the benefits of a market system. No matter which simulation
is used, it is essential that students understand the keys to a market system, which are
discussed on page 51 of 5 Step to a 5.
Chapter 6: Demand, Supply, Market Equilibrium, and Welfare Analysis
Supply and Demand
Many adults will tell you that all they remember about college economics is supply and demand. Students will typically be more knowledgeable about supply and
demand than they realize, as they have used these concepts throughout their lives.
However, most students will never have drawn a supply curve, so teaching them the
basics is a must. Chapter 6 details what students need to know. For example, students
must understand the idea that prices cannot affect the demand curve for a good, but
they do affect the quantity of that good demanded. Students will be asked throughout the AP exam about the determinants of demand and/or supply, so using specific
examples of each is helpful.
There are a number of simulations you can do in class that will enhance students’
understanding of how supply and demand interact. These include market simulations
in which half of the students in class are buyers and the other half are sellers of a good
(wheat, for instance). At the end of the simulation, students should understand how
equilibrium is found in a market economy, and how demand and supply schedules are
found. Simulations can be found online, but one of the most widely used is “A Market
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in Wheat” in the book Economics in Action: 14 Greatest Hits for Teaching High School
Economics by Jane S. Lopus.
This chapter is also a great place to introduce students to articles from either
newspapers or journals that have the idea of supply and demand at their core. These
can be articles about the price of gasoline, the price of movie or sports tickets, or
the price of college tuition. Students can be given an assignment to find an article
that deals with both the supply of and demand for a good and discuss how the two
concepts are shown.
Welfare Analysis
A useful way of teaching the idea of consumer surplus and producer surplus is to ask students how much they would be willing to pay for an item such as a doughnut, a candy
bar, or a slice of pizza. Have students write down their numbers, then offer to sell the
item for a specific price. (Some teachers will actually sell the good; others will only pretend to sell the good and then ultimately just give it away.) Follow-up discussion should
focus on whether or not any students had consumer surplus, and why those students
ended up with the surplus they did. You can then move into the idea of producer surplus and compare the marginal cost of production to the selling price. After students
grasp these concepts, you should then move to graphing both consumer and producer
surplus. The most important concept, the idea that equilibrium will lead to the highest
total welfare for society, is discussed on page 70. Stress this to your students so that they
are prepared for this question on test day.
Chapter 7: Elasticity, Microeconomic Policy, and Consumer Theory
So far, most of the concepts covered will be pretty basic for most teachers and students.
Students who struggle in Microeconomics typically begin struggling when they are
exposed to concepts like elasticity and utility maximization. This is an area to really
stress, as there are usually several questions in both the multiple-choice and free-response
sections of the AP exam about consumers maximizing their utility.
Elasticity of Demand and Elasticity of Supply
There are a number of ways to teach about elasticity. First off, students need to completely
understand what it means to have elastic or inelastic demand for a good or service. You
can pass out rubber bands to students and have them stretch them all the way out. Tell
them that the rubber band represents a number, say the number of diabetics standing in
line for insulin. Ask students, “What would happen if the price of insulin went up by
20 percent?” They should still be stretching their rubber bands because there would
be very little change in the quantity demanded (if there was any at all). Explain what
it means for a good to have inelastic demand. Then tell the students that the stretched
rubber band represents the number of people who plan to buy a specific brand of
paper towels, but who would be just as happy with a different brand. Now, ask them,
“What would happen if the price of that brand of paper towels went up by 20 percent?”
Students should now relax the rubber band, showing that the number of people who are
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demanding that brand of paper towels falls. This means that the demand for the good is
elastic. Hopefully, students understand the idea that if demand can cause a “stretch,” the
demand is elastic. If it cannot cause a stretch, the demand is inelastic.
Some teachers have students bring in pictures of goods and discuss whether the
demand for each good is elastic or inelastic. If teachers have access to laptops or
tablets, this can be done right in the classroom. Giving students examples of goods with
elastic or inelastic demand should help them remember the basic concepts of elasticity.
Understanding the determinants of elasticity is also critical because questions about
this concept can show up on the AP exam in either the multiple-choice section or the
free-response section.
In terms of the formulas that students need to know, remember that they cannot use
calculators on the exam. If students can simply remember that the elasticity of demand
is the percentage change in quantity demanded divided by the percentage change in
price, they’ll be fine on the exam. Some teachers choose to go into more detail and
teach students both the midpoint formula and the endpoint formula. Although it is very
helpful for students to understand the different methods of obtaining the elasticity of
demand, elasticity will not be tested at this level of detail.
Once students understand how to compute the level of elasticity, they will need to
understand what that number represents. On page 76 of 5 Steps to a 5, there are several
good examples to review with students.
The Total Revenue Test
Students absolutely need to get a complete understanding of this concept, which is
covered on pages 79 and 80. The chart at the top of page 80 will be useful for students
to memorize, as it will help them on a number of questions on the exam. Simply put,
if the price and revenue arrows move in the same direction, demand is inelastic. If they
move in opposite directions, demand is elastic. For instance, if the price of a good rises
and total revenue rises, then demand is inelastic.
Income Elasticity and Cross-Price Elasticity
Students often struggle to remember these formulas by the time they prepare for the
exam in May. Rather than rote memorization, the goal should be to get students to see
all elasticities as the response of quantity demanded to an external change. For example,
income elasticity is the response of quantity demanded to a change in consumer income.
Cross-price elasticity is the response of quantity demanded for one good to a change in the
price of a related good. Teach students the equations, but more important, teach them
what observations can be made once the answers are found.
Applications of Elasticity and Taxes
There seems to be a renewed focus by the Test Development Committee on testing
this material. It is vital that students take their understanding of elasticity and show
it graphically. Building on their previous knowledge of supply and demand, students
will now take the two concepts and show how the elasticity of supply and demand
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are affected by tax policy. A number of previous free-response questions deal with the
impact of taxes on supply and demand (see, for example, 2009 AP Microeconomics
exam, question 2).
Consumer Choice
This section provides some great lessons that students typically find interesting and fun.
For example, teaching about total utility and the law of diminishing marginal utility can
be done using a cup of water and a thirsty student. (Some teachers use items such as
candy, popcorn, or soda.) You will need to have a jug of water and a glass for this lesson
to be successful. On the chalkboard, make two columns, but leave space for a third.
Your drawing should look similar to the chart on page 93 in 5 Steps to a 5. Tell the
student that he or she needs to give a measure (in “utils”) of how much satisfaction is
derived from drinking successive glasses of water. A zero means that the student cannot
even take another sip, while a 10 means that the water quenched his or her thirst and
was exactly what was needed. Typically, the student will give a 9 or 10 for the first glass,
a 7 or 8 for the second, and so on, with this pattern continuing for five or six glasses.
(If the student wants to drink only two or three glasses, encourage him or her to continue, as it adds understanding if the students reach a certain point, and students will
often claim that they are getting just as much satisfaction after the second or third
glass.) Add the number of “utils” each time to come up with the “Total Utility” column. Then discuss what the Total Utility column means, and ask the question, “How
many glasses of water should the person consume?” Next, add the third column and
label it “Marginal Utility”. This should lead to a discussion of the law of diminishing
marginal utility and its application to demand curves. Students should also understand
why marginal utility decreases as each cup of water is consumed.
Utility Maximization Rule
There have been a number of recent free-response questions that test this concept (see
2012 AP Microeconomics exam, question 2). You can use a variety of examples to introduce this idea, as it is something that students currently use without realizing that they
are using economic analysis. You might even want to use the table of data from the marginal utility of water exercise (see page 93), and add another item so that students see
the application firsthand. Although students will quickly realize that every time they
consume an item, they are using the idea of maximizing their utility per dollar spent,
they often have difficulty remembering the formula MUx /Px = MUy/Py. If students are
introduced to the concept of marginal utility and gain a complete understanding of
the concept, they should have little difficulty in applying that knowledge to the utility
maximization rule.
Chapter 8: The Firm, Profit and the Costs of the Production
Explicit and Implicit Costs
Students are definitely going to see questions about this concept on the AP
Microeconomics exam, so it is important to teach it clearly so that they can gain a
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complete understanding of it. As long as students can remember that explicit costs are
cash payments and implicit costs are the opportunity costs of the resources used, they
will be fine to continue learning about production and cost. For a good example that
students can relate to, ask the question, “What are the explicit and implicit costs of
playing an instrument?” Students can usually give you the out-of-pocket costs for the
instrument, lessons, accessories, and so on. However, they also need to understand what
the implicit costs are: what else they could have done with that money, or what else
they could be doing with their time if they were not practicing. If you really want to
spark classroom discussion, ask students what the explicit and implicit costs of dating
are! Students might talk about the opportunity cost in terms of the time spent dating
and what else they could do with that time. (They can usually give great examples of
all the money spent dating, but when a student says that the opportunity cost of dating
is all the other people he or she could have dated, you might need a few minutes to get
the discussion back on track.)
Production and Cost
Most teachers use some variation of an exercise that has been used forever to
teach the concept of diminishing marginal returns. You can have students cut paper
into links, or have them make greeting cards or peanut butter and jelly sandwiches.
No matter which method is used, students should come to an understanding of
what diminishing marginal returns is, why it occurs, and why it is important in the
short run.
To conduct the greeting card exercise, ask a student to come to the front of the
class and explain to the class that the student has a fi xed number of supplies with
which to create greeting cards. Provide a marker, a pair of scissors, and a stapler. Give
the student one minute to create the cards (a half-sheet of paper, a smiley face on the
front, folded, and stapled) and write down on the chalkboard how many have been
made. Next, add one more student to help, give the pair another minute to produce
cards, and record how many they create together. Keep adding students until you
have a team of five or six students producing cards. At the end of the exercise, the
class will have a chart that lists the “Number of Students” (or “Units of Labor”) in one
column and the “Output of Cards” in the other. After the chart is complete, review
the data and ask students how many cards this business should make. Students will
often identify the highest number of cards (maximum total output) and the corresponding number of students that should be employed. When you ask the students
what additional column of data is needed, typically a bright student will realize that
the most important column would be marginal product. Once you create a column
for “Marginal Product”, students should see that at first marginal product rises, but it
quickly falls when too many students are attempting to create the cards. This should
give students a much clearer idea of why businesses hire the number of workers they
hire, and how diminishing returns affects short-run production.
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Economies and Diseconomies of Scale
Although it is vital for students to understand all the information in Chapter 8, it seems
that they often struggle with the idea of economies and diseconomies of scale. Once
you have taught the concepts, you can use the lesson of the greeting cards to further
students’ understanding by asking them the following question: “If 1,000 more cards
were needed, who could make them at a lower average cost, Hallmark or this classroom?” Students should get the idea of what economies of scale are and why they occur.
Discussing why diseconomies of scale occur is also important, and it is recommended that
teachers have students copy the graph on page 112 (see Figure 8.8) and understand why
the LRAC is shaped the way it is.
Chapter 9: Market Structure, Prefect Compition,
Monoploy, and Things Between
Market Structure
More than 50 percent of the questions on the AP Microeconomics exam are based on
the material covered in Chapter 9 of 5 Steps to a 5. It is highly recommended that students be able to draw the different graphs for perfectly competitive firms, monopolistically
competitive firms, and monopolies. It is highly likely that they will need to draw at least
one of these graphs on the free-response section, and there will be a number of multiple-choice questions about market structure. Students will be responsible for knowing
all of the following: correct labeling, showing the shifting of the graphs, identifying
the shape of the curves, and identifying the areas of profit and/or loss, deadweight loss,
and consumer and producer surplus. Teachers can have students make posters of the
different types of market structure graphs and place these posters throughout the classroom. Although it may be difficult for teachers to cover up these graphs when students
are being tested, this practice does allow students to see the graphs on a daily basis.
There are a few different ways to get students to understand how to draw the
graphs. One of the activities teachers use is taking the students outside and letting them draw on the sidewalks or parking lots with sidewalk chalk. This allows
students to see the graphs in a much larger setting, and it gives them the chance to
talk through their answers prior to drawing them. Although colored pencils are not
allowed on the AP exam, it helps if you have different colors of chalk. This makes
it much easier for students to see the curves on the graphs, and it makes the graphs
easier for other students to grade. Typically, students should be put in groups of
three or four and given an area to draw on. You should come up with four different
problems for the students to draw, typically one for each member of the group. The
problems should closely align with past free-response questions, but make sure they
are questions that students have not seen prior to the day they will be drawing the
graphs. Allow students to talk to each other, but make sure the students know that
each of them is responsible for one of the graphs.
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After the students are finished with all four graphs, have them place a sheet of
paper with all the information about the graphs on the ground next to their drawings.
They should then switch to grading another group’s drawings. On a separate sheet
of paper, create a rubric to enable students to grade one another’s work. For instance,
the first grade point might be a labeling point, the second grade point might be the
correct shape of the average total cost (ATC) curve, and so on. Hand these out after
all the groups are finished with their graphs and ready to move. At least one person
in each group should be in charge of grading, and another person should be recording the grade on the sheet. Once all the groups have graded another group’s graphs,
head inside and collect the sheets. This makes for an interesting lesson for two main
reasons: first, it gives students the chance to get outside the classroom, and second, it’s
a great recruiting tool for AP Microeconomics, as other students will wonder what all
those graphs are! Without question, it will be extremely helpful for students to graph
as much as possible prior to the AP exam.
Another activity is to give students 10 different graphing problems in microeconomics and have them graph them all. You could have problems such as “Show a longrun average total cost curve if the firm is experiencing diseconomies of scale,” or “Draw
a correctly labeled graph that shows a monopoly producing at an allocatively efficient
level.” After the students have had time to graph all 10 problems, randomly call on
students to come up and draw theirs on the whiteboard at the front of the class. (Some
teachers have a small whiteboard for every student. In this case, the students can be
assigned a problem and hold up their answer for the class.) This allows students to see
what mistakes other students are making, and it also gives them reinforcement for what
they are doing correctly.
It really cannot be emphasized enough how important it is for students to be comfortable graphing the different types of market structures and to know all the information that is represented on the graph. One of the best tips in Chapter 9 is the “follow
the yellow brick road” analogy (see pages 120 and 121). Make sure students understand
that the profit-maximizing output level is found where MC = MR, and that all other
necessary information can be found based upon this quantity.
An easy handout to create for students is one in which the four types of market
structure are listed, along with columns labeled “Number of Firms,” “Type of Product,”
“Barriers to Entry,” and “Examples of Firms.” This can be done twice: once while students are learning about market structure, and again during review for the AP exam.
To review the concepts, give students a blank chart and ask them to complete it. This
will help reinforce their understanding of market structure.
Price Discrimination
Students enjoy learning about price discrimination. There are a number of great examples
that they like talking about. Some examples are the “short” cappuccino at Starbucks,
movie ticket discounts for students and seniors, and airline ticket pricing. (The “short”
cappuccino is a great example, as most students will probably not have heard of it. It is
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a cappuccino that has less milk in it and costs less but is not on the menu.) Tell the students that the easiest way to start a riot on an airplane is to announce how much you paid
for your ticket, as most of the people on the plane will have paid different prices. Several
factors affect airline ticket pricing: the website where tickets are purchased, when the
tickets are bought, where on the plane the seats are located, and so on. It is important for
students to know the conditions necessary for a firm to engage in price discrimination,
but it is also helpful to get students engaged in the learning. Having students come up
with their own examples of price discrimination is great because it forces them to think
in more depth to describe how a firm can charge consumers different prices for the same
good. A good discussion to have in class is whether or not schools should engage in price
discrimination with regard to admission to athletic events. Write out all the sports that
the school offers and the price of admission to each event for students and nonstudents.
(For example, schools often price football tickets differently for students and for the
general public.) Have students come up with a pricing plan based on their knowledge
of supply and demand and price discrimination. Students will probably design a pricing
plan that would be likely to increase total revenue for the school. This is a good time to
further the discussion by asking questions such as, “If schools could increase revenue by
charging different prices for the same event, why don’t schools typically engage in price
discrimination?”
Oligopoly: Game Theory
In recent years, there has been a definite increase in questions dedicated to testing
a student’s knowledge of game theory. There have been free-response questions (see
2009 AP Microeconomics exam, question 3) as well as multiple-choice questions on
this subject. Students should be familiar with the basics of game theory and should be
able to create and solve a matrix. There is an easy way to introduce game theory, and it
is one that few students will forget. Try the following prior to any discussion of game
theory. As you greet students entering your classroom, tell two students who sit next
to each other that you need to speak to them. Do not tell them why, and pretend to
appear angry with the students. After all of the students have entered the classroom,
take the two selected students outside into the hall and tell them that you are going
to pretend to accuse them of cheating. Ask them to just go along with it. However,
you will need to brief them on what they will need to do. Tell them to say “I cheated”
when they are asked whether or not they did so. Then tell them to appear to walk
to the principal’s office and return in about three to five minutes. Once the students
have walked away, enter the classroom and explain to the remaining students that you
are angry because two students in the classroom cheated. Then tell the students that
you have already talked to the administration and have come up with a way to penalize the two cheating students. Write on the board a matrix that contains the following options for the two students: “Confess” or “Deny.” This is where it is important
to convince students that you are serious. The matrix should look like the one
below.
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Student 1
Deny
Confess
Confess
0, 0
100, 0 + suspension
0 + suspension, 100
75,75
Student 2
Deny
Explain to the students that although you do not have proof that the two students
cheated, you clearly know that they did. Being the kind economics teacher that you
are, you have decided to give them a chance to confess to cheating without any other
penalties from the administration. Briefly explain what the numbers mean, and tell the
students that the two cheaters are being briefed on the same information by the administration and will either confess or deny cheating when they return. Tell the class that
if both students admit that they cheated, they will both get 0s on the test but will face
no further punishment. If they both lie and deny that they cheated, tell the class that
you will give them both a score of 75 percent, or C, because although you know that
they cheated, you have no proof. If Student 1 admits cheating but Student 2 denies it,
Student 1 gets a 100 and Student 2 gets a 0 and a one-day suspension from school. Tell
the class that you are rewarding the student for admitting the truth and also punishing
the other student for cheating and lying.
Once the “cheaters” return, call them in one at a time. (It helps to go out into the
hall and reinforce that you need them to act upset, and to definitely confess.) Have
the first one enter the classroom. Ask, “Did you talk to the administration, and do
you understand what is happening?” The student will typically mutter a response,
and then you can quickly go over the options. Ask, “Did you cheat?” Hopefully,
the student will say something like, “I didn’t cheat, but I’m not getting suspended.
So fine, I cheated.” Then call in the second “cheater.” Make sure no one in the class
reveals what the first “cheater” said. Once the second “cheater” confesses, it is time
to tell the class that no one cheated and that they have just learned a very important
concept of oligopolies.
You can now explain the idea of the prisoner’s dilemma and tell students that they
have just seen it in action. You can also explain the concept of a dominant strategy and
how to work through a matrix. It is helpful to write another example of game theory
on the board immediately and have the students work through it together. There is
further discussion of game theory at http://apcentral.collegeboard.com/apc/public/
repository/06_Economics_Special_Focus.pdf.
In addition to understanding the game matrix, the dominant strategy, and how to
predict what decisions each player will make, students will also need to understand the
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concept of the Nash equilibrium. More information about the Nash equilibrium from
the Test Development Committee can be found on the College Board website at http://
apcentral.collegeboard.com/apc/public/courses/209323.html.
Chapter 10: Factor Markets
Free-response questions dealing with factor markets have appeared on a number of recent
AP Microeconomics exams. (See 2011 AP Microeconomics exam, question 2) Students
need to gain a true understanding of marginal revenue product, marginal factor cost, and
derived demand while studying factor markets. In addition, they need to be able to draw a
labor market graph correctly and understand how wages and quantity of labor are found.
This is a good time to tell students that they have only a couple of graphs left to learn. By
this point, students often feel overwhelmed by all of the graphing they need to do, so it is
always good to tell them that they already have the knowledge to graph labor (or capital)
markets.
The chart on page 145 (see Table 10.3) of 5 Steps to a 5 is important as the key for
students to understand what factors increase and decrease the demand for labor. Have
students replicate this chart and give examples of such factors. There are countless
articles that you can use at this point to help students understand how labor markets
function in the real world. For instance, in recent years, the price of high-definition
televisions has continued to fall, and many HDTV suppliers have cut their labor
forces. One good teaching activity to increase students’ knowledge of labor markets
can be downloaded from http://apcentral.collegeboard.com/apc/public/repository/apsf-economics-markets.pdf.
Recent AP exams have emphasized capital markets as well. (See 2010 AP Microeconomics exam, question 2.) Students should have confidence in answering both multiplechoice and free-response questions that deal with capital markets. In addition, students
should understand the least-cost rule and how it applies to hiring decisions if there are
two resources to use.
Monopsonies
There has been much recent discussion about monopsony labor markets and whether or
not they should be tested. In 2011, the Form B test had a free-response question about
monopsonies. However, some textbooks do not have any information about monopsonies, so make sure to cover this section in Chapter 10 of 5 Steps to a 5 (see pages 149
and 150).
Chapter 11: Public Goods, Externalities, and the Role of Government
This is another area in which you can have great student discussion throughout the
unit. Students enjoy learning about the differences between private goods and public
goods, and what free riders are.
Here is an activity you can use to teach about free riders. Tell students that they
are going to buy doughnuts or pizza to eat the following day. Ask each student to
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take out a small sheet of paper and write down how much he or she is willing to
contribute, but tell the students that it will cost approximately $3.00 per student to
feed them all. Tell them that if they contribute less than $3.00, you will make up
the difference. Also, make sure they understand that their contributions are totally
confidential, so they should not put their names on their papers. Collect all the
papers, and then give students the bad news: no snacks tomorrow. It will not take
long for students to learn about free riders as you read off the amounts written down
on the sheet. Typically, some students will write down the full $3.00 amount, but
it is doubtful that every student will do so. In fact, do not be surprised if quite a
few students contribute nothing at all. This is a great time to talk about examples
of free riders among museumgoers, listeners to National Public Radio, or union
members who do not pay dues. The example given in 5 Steps to a 5 that describes
the problems of students working in groups will also usually lead to good classroom
discussions. You can then lead the class in a discussion of possible solutions to the
free-rider problem.
Externalities
Students also enjoy learning about externalities and how the government attempts
to correct such market failures. There are a number of great examples you can
use to discuss both positive externalities and negative externalities. If you are permitted to play music as students enter the classroom, demonstrate negative externalities
by playing obnoxious music loud enough to annoy the students (but not so loud that
it bothers neighboring classrooms). Tell students how much you enjoy playing this
type of music as loud as possible. When students beg you to turn it off, ask them
why some teens play car radios so loudly that people outside of the car are forced
to endure it. Next, explain to the students what a negative externality is and ways
in which governments can correct for it. For example, local police officers can use
decibel meters to measure the amount of noise and issue tickets to people or businesses that are violating a noise ordinance.
Another example of a negative externality that leads to good discussion is the
effects of secondhand smoke. Students are usually amazed to hear stories about the
amount of smoke coming out of most faculty rooms in the 1970s and 1980s. Some
schools even allowed students to have their own smoking lounge! Ask students to
imagine a three-hour flight on which many passengers are smoking. Discuss how
the government has corrected for the negative externality of secondhand smoke by
taxing cigarettes. You can then show how negative externalities are graphically analyzed. Use graphs to show, for example, the negative externality of high-calorie foods
and why many state and local governments are considering “fat taxes” on items such
as soda and junk food.
In the past, students have had some difficulty graphing externalities and showing how to find the level of subsidies or taxes needed to correct for the market failure.
A good discussion of this can be found in a curriculum module that is given at AP
Microeconomics workshops.
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Tax Policy
Chapter 11 of 5 Steps to a 5 closes with a discussion of tax policy and income distribution. Although students may want to politicize the discussion of these two issues, the
questions on the AP exam have no relevance to political debate. Students will need to
learn and understand the different types of taxes and how revenue is collected. This is
also a good time to explain the difference between marginal tax rates and average tax
rates. Show students the current federal income tax brackets. For example, if the highest tax bracket of 35 percent begins at $388,000, ask students the following question:
“Pretend you have a job making $387,000 and are taxed at the 33 percent tax bracket.
Your boss offers you a $3,000 raise, which will push you into the new tax bracket of
35 percent. Should you take the raise?” Students who mistake the marginal tax rate
for an average tax rate will often assume that the raise will result in lower net income.
However, once they understand marginal tax rates, they should be able to figure out
that even with a marginal tax rate of 35 percent, the raise will still result in higher net
income.
Questions about income distribution, the Lorenz curve, and the Gini coefficient are
typically found on the multiple-choice portion of the AP exam, so students must be able
to describe what is being shown on the graph. It is helpful to show examples of different
countries and discuss the reasons for their position on the graph.
Step 5: Giving Practice Exams
All previous free-response questions from 1999 to the most recent exam can be
accessed at http://apcentral.collegeboard.com/apc/members/exam/exam_information/
2084.html. By the end of the term, students should have completed all of these previous free-response questions. If you want to organize the free-response questions
by topic, David Mayer, a teacher in Texas, has already done so at his website. You
can use his lists to test students throughout the year based on what you are currently
teaching. The questions and topics can be found at http://tw.neisd.net/webpages/
dmayer/apm.cfm.
Exam Security Issues
It is important to remember that not just you, but also your students can easily access
previously administered AP free-response questions. You may not be able to prevent
your students from “researching the questions” prior to a test day. Many teachers have
taken all of the free-response questions and cut and pasted them into new sets, so
students cannot tell which year the questions are coming from. Security is also now
a problem with the multiple-choice portions of the released exams from 2000, 2005,
and 2010. For example, there are sites where students can download the entire 2010 AP
Microeconomics exam. Some teachers have even put entire exams on a web page so that
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students can study them from home. This practice has been detrimental to all other AP
Economics teachers around the world!
You have some options for dealing with the test security issue. First, never tell
the students the year of the test you are giving them. You may also want to reorganize the test questions into new tests so that if, for example, students studied the
answer key for the 2005 AP Microeconomics exam, your test might include only
10 questions from that exam. Or you may simply choose not to grade the practice
tests, thus ensuring that students do not spend time trying to access the tests and
answers online.
Whichever solution you choose, the need for these practice tests cannot be overstated. In 5 Steps to a 5, there are four practice tests that will certainly help students. In
the answer section, each question is explained clearly and concisely.
You have many options for giving students these tests. Some teachers give all the
tests in class on separate days. However, many teachers probably do not have enough
spare time. You can also have students take and grade their tests for homework. The
benefit of this choice is that it frees up class time to devote to other review strategies.
Of course, there is no guarantee that students will do all the work on their own without
“utilizing” the answers. However, the answers are written in such a way that if a student
misses a question, enough details are provided to help him or her recognize why the
answer was wrong.
When giving students a practice test, it is important to try to replicate the
conditions they will encounter on test day. Some schools allow students to take
practice tests in the same room where the actual AP exam will be given. Whether
or not this is possible at your school, make sure to follow the specified time limits
for each practice test section: 70 minutes for multiple choice and 50 minutes for free
response.
Students should have a time management strategy prior to the AP exam. Many
teachers advise students to try to answer all of the multiple-choice questions in only
65 minutes and to use the last 5 minutes to review any challenging questions. Another
strategy is to announce every 15 or 20 minutes how many questions students should
have completed. Although some students might find this to be an interruption, it is
highly advisable to do it for the first practice test. This approach gives all students an
idea of the rate at which they should be answering questions during each interval. Some
students will find that they are way behind the pace they need to achieve if they are to
complete the test.
Students should also keep in mind the instruction from Chapter 4 about eliminating “dumb answers” from the multiple-choice questions. They should use this strategy
whenever they are tackling AP-style multiple-choice questions. They might also consider using a system of symbols to mark the answer choices: a star for “definitely not
the answer,” a circle for “probably not the answer,” a square for “might be the answer,”
and so on. That way, when they go back to review their answers, they can follow their
prior thinking and decision-making processes.
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Scoring the Exam to Get the Approximate AP Grade
Students should be fairly confident in gauging their AP score after taking a couple
of practice exams. Share with students the idea that their AP score is not necessarily
an indication of how much they know, but rather of how much they know relative to
all the other students who took the AP Microeconomics exam. Knowing how many
questions they need to answer correctly to get a score of 4 or 5 often relieves stress.
Finding out that they can miss one out of every six questions and still potentially
get a 5 (according to College Board statistics) is a huge confidence builder for most
students.
The free-response questions on the College Board website often include the average
score. The benefit for many students is that even if they think they did poorly on an
essay question, they may still be surprised to learn that they did better than the national
average. It is also helpful to show students what score they need if they are to get a 5.
For example, on a 12-point question, a student needs to score at least 9 to 10 points to
be on pace for a 5 on the entire exam.
Resources for the AP Microeconomics Instructor
Online Resources
In addition to the AP Teacher Community at the College Board website, there are a
number of online resources to which you can direct your students. Here are some
examples:
• www.reffonomics.com. This is a site that was designed by AP readers Steven Reff
and Dick Brunelle. It offers activities for students who might be struggling with
certain concepts. A student can go at his or her own pace and can manipulate the
online graphs to see how a shift affects price, quantity, and so on. There are also unit
quizzes and tests, and each student can get an instant grade with feedback tailored
to his or her individual needs. All of the relevant information students will need to
know for the AP exam is covered.
• www.khanacademy.org. Kahn Academy is a free site that currently has more than 70
video lessons on microeconomics. Students will find the videos easy to understand,
and they can proceed at their own pace as well. Although the site is not specifically
tailored to the AP Microeconomics curriculum, most of the videos are very applicable to the class.
• www.welkerswikinomics.wetpaint.com. This is another great site for students.
There are outlined notes for each unit, a discussion forum for teachers, and study
guides available for use by teachers. Both you and your students will find much of
value here.
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• www.freakonomics.com. Of all the sites that students use, the freakonomics blog
may have the most to offer. It can also provide you with supplemental material to
reinforce specific concepts. Obviously the site is not customized for the AP Microeconomics class, but there are some wonderful articles that can lead to in-depth
classroom discussion.
• www.apcentral.collegeboard.com/apc/members/exam/exam_information/2084.
html. You will find all of the free-response questions since 1999 on the AP Central
website. These include the Form B free-response questions from 2002 to 2012.
Supplemental Books
The following is a brief list of books that you might want to use in your AP Microeconomics
class. Many of these books are reviewed by AP teachers at the Teachers Resource page on
the AP Central website. Some teachers give students a summer book to read prior to the
AP Microeconomics class, while others assign these books for extra credit. All of these are
highly recommended and should be understood by the average AP student.
•
•
•
•
•
•
•
•
•
Naked Economics by Charles Wheelan
Predictably Irrational by Dan Ariely
New Ideas from Dead Economists by Todd Buchholz
Freakonomics and SuperFreakonomics by Steven Levitt and Steven Dubner
The Undercover Economist by Tim Harford
Economics by Example by David Anderson
The Armchair Economist by Steven Landsburg
Boomerang by Michael Lewis
Murder at the Margin or the Fatal Equilibrium by Marshall Jevons
After-the-Exam Activities
Schools have varying amounts of time between the AP exam and the end of the school
year, but typically there are two to four weeks of classes. During this time, you can use
a number of different activities to further students’ understanding of economics. You
can find a variety of activities at the AP Teacher Community on the College Board
website. Each May, teachers usually post new activities to fill the weeks following the
AP Microeconomics exam. Examples include:
• Presenting a financial unit that includes in-depth discussion of the stock market,
investing, and personal finance.
• Having students read one of the supplemental books listed earlier and write a paper
detailing the economic concepts that were discussed.
• Inviting guest speakers to come into the classroom to discuss entrepreneurship, the
benefits and costs of being small business owners, and other career choices.
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• Taking field trips to visit local financial institutions, including commercial banks,
Federal Reserve branches, stock exchanges, and many others.
• Showing movies that illustrate issues in microeconomics.
• Asking students to select one major economic thinker from the past 250 years and
give a classroom presentation on that person’s economic ideas.
• Having students create a song using economics terms. Students can download
karaoke versions of songs online, then write lyrics and sing them while they make a
music video. This is also a creative way to use what students have learned. Examples
of student videos can be found on YouTube.
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