James C. Lerch
Quality Schools International
A.P. Microeconomics Syllabus
Course Description
The AP Microeconomics course provides you with a broad introduction to the field of
microeconomics, one of the social sciences. The premise of this course is that decision-making
is based on economics. This course is divided it into five essential units as outlined below.
We will use as our primary text an online text called Principles of Economics.
However we will also use a wide variety of additional material to assist you in your learning.
This course culminates in a College Board AP Examination that test both broad factual
knowledge and analytical skills. The examination is divided into two major sections: the
Multiple Choice section and the Free Response section. Here is a breakdown of the parameters
of the Microeconomics AP Examination:
In Microeconomics you will gain a thorough understanding of the principles of economics that
apply to the functions of individual decision makers, both consumers and producers, within the
economic system. The course places primary emphasis on the nature and functions of product
markets and includes the study of factor markets and the role of government in promoting
greater efficiency and equity in the economy. The essential units are:
1.
2.
3.
4.
5.
Basic Economic Concepts
The Nature and Functions of Product Markets
The Theory of the Firm
Factor Markets
The Role of Government
Course Skills
In this course you will develop the following skills:
 Demonstrate economic questioning and analysis skills with a special emphasis on
marginal analysis.
 Interpret and create a variety of graphical models and economic concepts.
 Analyze the development of modern economic theory.
 Use and interpret the language of business and basic measurements of economic
performance.
 Apply economic skills and concept knowledge to higher college-level economic
courses.
Course Assessment
We are a standards-based school, where your work is assessed for mastery. When you combine
the relevance of our academic system with the rigor of AP, the result is a stringent college-level
course where consistent excellence is expected. Summative Assessments will consist of the
following. Formative Assessments, while not necessarily forming part of your grade, will be
used to prepare you for the Summative Assessments, and will imitate them.
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Examinations are given at the end of each unit and include AP style multiple choice
and essays.
Free Response Questions, frequently involving are assigned frequently both as part
of examinations and as stand-alone assessment tools. Responses will be assessed in
terms of both core structure and content. You will be introduced to the AP Essay
grading system, and learn to appreciate the vital importance of a well-crafted
thesis. Paragraphs will be scored for evidence of both factual knowledge and
analytical ability.
Course Materials
Primary Text
 Rittenberg, Libby, and Timothy Tregarthen. "Principles of Economics." Flat World
Knowledge Catalog. Flat World Knowledge, Inc., June 2011. Web. 27 May 2012.
<http://catalog.flatworldknowledge.com/catalog/editions/599>.
Secondary Texts
 Ray, Margaret, Paul R. Krugman, and David A. Anderson. Krugman's Economics for
AP. New York: Worth Publishers, 2011. Print.
 McConnell, Campbell R., Stanley L. Brue, and Sean Masaki Flynn. Economics:
Principles, Problems, and Policies. 19th ed. New York: McGraw-Hill/Irwin, 2012. Print.
 Bade, Robin and Parkin, Michael Foundations of Economics, AP Edition. 5th Ed. (Upper
Saddle River, New Jersey: Prentice Hall, 2010)
Supporting Materials
 Anderson, David A. Cracking the AP Economics Macro & Micro Exams. 2011 ed.
New York: Random House, 2010. Print.
 Anderson, David A. Economics by Example. New York, NY: Worth Publishers,
2007. Print.
 Anderson, David A. Economics by Example Teacher’s Manual. New York, NY:
Worth Publishers, 2007. Print.
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Dodge, Eric R. AP Microeconomics/Macroeconomics, 2010-2011. Dubuque, Iowa:
McGraw-Hill Contemporary Learning, 2011. Print.
Collegeboard. Professional Development AP Economics Workshop Handbook 201011. Collegeboard, 2010.
Lopus, Jane S. Capstone: Exemplary Lessons for High School Economics. New
York, N.Y.: National Council on Economic Education, 2003. Print.
Lopus, Jane S. Capstone: Exemplary Lessons for High School Economics: Teacher's
Guide. New York, N.Y.: National Council on Economic Education, 2003. Print.
Lopus, Jane S., and Amy M. Willis. Economics in Action: 14 Greatest Hits for
Teaching High School Economics. New York, N.Y.: National Council on Economic
Education and Junior Achievement Japan, 2003. Print
Morton, John S., and Rae Jean B. Goodman. Advanced Placement Economics:
Teacher Resource Manual. 3rd ed. New York, N.Y.: National Council on Economic
Education, 2003. Print.
Morton, John S., and Rae Jean B. Goodman. Advanced Placement Economics:
Microeconomics Student Activities Workbook. 3rd ed. New York, N.Y.: National
Council on Economic Education, 2003. Print.
Solman, Paul. The Paul Solman Video Series. McGraw-Hill Publishing Company,
2006. Video.
Wheelan, Charles. Naked Economics: Undressing the Dismal Science. Fully rev. and
updated. New York: W. W. Norton, 2010. Print.
Course Planner
1. Unit One - Basic Economic Concepts
Chapters 1 - 2 of Principles of Economics.
Unit 1 focuses on basic economic concepts. These concepts account for 8 to 12 percent
of the AP Microeconomics Examination. The most important concept is scarcity, which
in turn result in the need to make choices. You must understand scarcity, opportunity
cost, choice and trade-offs. You must be able to illustrate these concepts on a production
possibilities curve.
Because of scarcity, every economic system must determine which goods to produce,
how to produce them and for whom to produce them.
Much of the course will focus on how specialization and exchange increase the total
output of goods and services. You must be able to differentiate between absolute
advantage and comparative advantage, and be able to use comparative advantage
analysis to determine optimal trade conditions.
In this unit, you will:
 be introduced to the economic concepts of scarcity, opportunity cost and
marginal analysis;
 learn and use the production possibilities frontier and circular flow models
 focus on comparative advantage and uses, and;
 reinforce understanding of these economic concepts by applying them to a variety
of conventional and unconventional situations.
2. Unit Two - The Nature and Functions of Product Markets
Chapters 3 – 8 of Principles of Economics
Unit 2 focuses on the laws of supply and demand, consumer choice and their effects on
the allocation of resources. These concepts account for 20 percent to 30 percent of the
AP Microeconomics Examination.
You will learn that supply and demand curves are models for understanding human
behavior in which consumer choice is emphasized. This unit contains many
opportunities to graph changes in demand, supply and equilibrium price and quantity.
The unit also covers elasticity of demand and supply, as well as the effects of price
ceilings and floors, income effects, substitution effects and diminishing marginal utility.
In this unit, you will:
 learn the assumptions of determinants of supply and demand in order to use
models of markets for description, analysis and prediction;
 understand the significance and role of prices in a market economy;
 use concepts of elasticities of demand and supply to evaluate quantitatively
economic situations;
 evaluate the use of government price controls (floors and ceilings), and;
 apply supply and demand analysis to a variety of conventional and
unconventional situations.
3. Unit Three - The Theory of the Firm
Chapters 9 – 11 of Principles of Economics
The theory of the firm is the heart of AP Microeconomics. In this unit, it is important to
understand and to differentiate between short-run and long-run equilibrium for both a
profit-maximizing individual firm and for an industry. You must understand the
relationships among price, marginal revenue, average revenue, marginal cost, average
cost and profit.
You must be able to compare a monopolist’s price, level of output and profits with the
price, level of output and profits of a perfect competitor. You should also be able to
explain why perfect competition is preferable to monopolistic competition.
You must also be able to evaluate government regulation of monopoly.
In this unit, you will:
 learn the market structures of perfect competition, monopoly, mmonopolistic
competition and oligopoly;
 learn about the costs of production;
 determine short-run and long-run equlibria of a perfect competitor for both the
firm and the industry;
 identify and apply the basics of the monopoly firm, including comparison of the
results achieved by a profit-maximizing monopolist and a profit-maximizing
perfect competitor;
 examine why monopolies are bad and review potential regulatory policies toward
them, and;
 examine “in-between” market structures of monopolistic competition and
oligopoly using game theory to understand how oligopolistic decisions are made.
 provide solutions to problems involving market structure and business decision
making.
4. Unit Four - Factor Markets
Chapters 12 – 14 of Principles of Economics
The basic analytical framework for examining factor markets uses concepts similar to
those used in the supply and demand unit and the theory of the firm unit. Supply,
demand, equilibrium, marginalism and profit-maximizing are all analyzed again in this
unit. The only difference is that they are applied to inputs rather than outputs. You will
not be learning a lot of new concepts in this unit. Instead, you will apply concepts
already learned in studying product markets to the factor or resource markets.
The demand curve for a resource, however, is derived from the product that the resources
can produce. In other words, you will be asked to relate demand in the product market to
the demand in the resource market.
A key concept in the study of factor markets is marginal productivity analysis, which is
used to analyze how wages, rents, interest and profits are determined. This unit stresses
wage determination and uses it as an example to show how the factors of production are
priced. The key is that a firm will hire inputs until marginal revenue product equals
marginal resource cost.
We will also look at how wages are determined in a perfectly competitive labor market
and in a monopsonistic labor market. The unit analyzes the effects of minimum-wage
laws and union activities using both competitive and monopsonistic models.
In this unit, you will:
 use the circular flow diagram to show the differences between factor markets and
product markets;
 describe and use the key concepts in factor markets;
 examine how marginal productivity theory determines how resource prices are
established;
 analyze how wages are determined in competitive labor markets and in
monopsonistic labor markets;
 discuss the concept of economic rent;
 use thoughtful questions to apply factor-market concepts to a variety of
conventional and unconventional situations.
5. Unit Five - The Role of Government
Chapters 15 – 19 of Principles of Economics
In this unit you will develop criteria to determine which activities government should
undertake and to evaluate how well government performs these activities.
You will learn that governments must provide public goods. However, pure public
goods are rare and must meet the criteria of shared consumption and nonexclusion.
You will also learn that governments try and correct market failures. A market failure
occurs when the private market produces too much or too little of a good because of the
existence of negative or positive externalities. Market failures also occur when people in
markets do not have sufficient information, and this is also used to justify government
intervention.
Although government intervention into the market (for whatever reason), may correct
market failures, government policies can also fail. Public-choice theorists believe
politicians and government officials are often as self-interested as businesspeople. The
views of public-choice theorists will be offered to provide balance regarding the proper
role of government.
In this unit, you will:
 explain the conditions under which a good or service should be provided by the
private sector or by government;
 evaluate the role of externalities;
 examine the arguments of public-choice economic theory;
 discuss the economics of taxation.
Description of Frequently Used Class Activities
There are a variety of activities that we will conduct during class for each of the six units:
 Graphing Activities – Each student will be frequently asked to properly draw
economic graphs.
 Class Quizzes – these quizzes are most often formative assessments designed to
provide me with a gauge of your reading comprehension.
 Multiple Choice Exams – these AP-style exams will be administered at the end of
each unit and also as review prior to the actual AP Exam in May. Students who take
the exam will have an option to earn half credit by admitting they don’t know the
answer to the question, and then answering it for homework, identifying both the
correct answer, why it is correct, what theme(s) is/are involved, and what historical
thinking skill(s) is/are involved.
 Forums – Students will be asked to participate frequently in online forums where
various microeconomics issues will be discussed.
 Note-taking- You are encouraged to take notes, summarize and re-organize them.
 Self-Assessment Questionnaires/Rubrics – We will use a variety of questionnaires
and rubrics to help you engage in metacognitive thinking.
 Watch Videos – There are excellent videos available that may be shown throughout
the year.
 Listen to Podcasts – occasionally I will ask you to listen to podcast lectures of other
economists.
 Lecture – traditional lecture is relatively rare, but still sometimes necessary. When I
lecture, you can count on requests for student summarization of what I have said, and
also opportunities to develop student pairs that work together to digest what is being
discussed.
Essential graphs for AP Microeconomics
Production Possibilities Curve
A
B
G
o
o
d
W
C
D
F
Concepts:
• Points on the curve-efficient
• Points inside the curve-inefficient
• Points outside the curve-unattainable with
available resources
• Gains in technology or resources favoring
one good both not other.
X
E
Good Y
Demand and Supply
(Market Clearing Equilibrium)
P
S
Variations:
• Shifts in demand and supply caused by
changes in determinants
• Changes in slope caused by changes in
elasticity
•Effect of Quotas and Tariffs
Pe
D
Qe
Q
Floors and Ceilings
P
P
S
Floor
Pe
S
Pe
Ceiling
D
D
QD
Qe
QS
• Creates surplus
• Qd<Qs
Q
QS
Qe
QD
• Creates shortage
• Qd>Qs
Q
Consumer and Producer Surplus
P
ConsumerS
Pe
Producer
D
Qe
Q
Effect of Taxes
A tax imposed on the BUYER-demand curve moves left
• elasticity determines whether buyer or seller bears incidence of tax
• shaded area is amount of tax
• connect the dots to find the triangle of deadweight or efficiency loss.
Price
buyers pay
P
Dead Weight Loss
S
Price w/o tax
Price sellers
receive
D1
D2
Q
A tax imposed on the SELLER-supply curve moves left
• elasticity determines whether buyer or seller bears incidence of tax
• shaded area is amount of tax
• connect the dots to find the triangle of deadweight or efficiency loss.
Dead Weight Loss
Price buyers
pay
S2
P
S1
Price w/o tax
Price sellers
receive
D1
Q
Purely Competitive Product Market Structure
Long run equilibrium for the market and firm-price takers
Allocative and productive efficiency at P=MR=MC=min ATC
P
MC
P
S
Pe
AC
MR=D=AR=P
Pe
D
Qe
Q
Qe
Q
Variations:
• Short run profits, losses and shutdown cases caused by shifts in market demand and
supply.
Imperfectly Competitive Product Market Structure
Monopoly Market Structure
Single price monopolist-price maker
Earning economic profit
Natural Regulated Monopoly
Selling at Fair return ( Qfr at Pfr)
P
P
MC
P
ATC
MC
Pm
ATC
PFR
PSO
D
Q
D
QF QS
Qm
Q
MR
MR
R
O
Q
Monopolistically Competitive Market structure
Long run equilibrium where P=AC at MR=MC output
P
MC
Variations:
• Short run profits, losses and
shutdown cases caused by shifts in
market demand and supply.
ATC
PMC
D
Qm
c
MR
Q
Pure Competition Resource Market Structure
Perfectly competitive Labor Market-Wage takers
Firm wage comes from market so changes in labor demand do not raise wages.
Wage
Rate
S
Wage
Rate
Wc
Wc
S=MRC
D=
∑ mrp’s
Qc Quantity
Labor Market
L=mrp
DQuantity
qc
Individual Firm
Variations:
• Changes in market demand and supply factors can influence the firm’s wage and
number of workers hired.
Imperfectly competitive market structure-Wage makers
Quantity derived from MRC=MRP (Qm)
Wage (Wm) comes from that point downward to Supply curve.
MRC
Wage
Rate
S
b
Wc
a
Wm
MRP
c
Qm
Qc
Q
Externalities
No Externality
Negative Externality
MSC 2
P
MSC
P
Pe
MSC
Pe
MSB
Qo
MSB
Q
Qo Qe
Q
Tax, direct controls, lawsuits, Coase theorem
Positive Externality
MSC
P
P
MSC
MSC2
Pe
Pe
MBC 2
MSB
MSB
Qe
Qo
Subsidy to buyer
Q
Qe
Qo
Subsidy to Seller
Q