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Macroeconomics & Microeconomics Concepts You Must Know

Review: AP Micro Final

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Review terms and concepts for the AP Microeconomics Final Examination

  • How to read the production possibilities curve
  • Characteristics of a capitalistic economy
  • Effects of excise taxes on markets
  • How dual shifts of demand and supply affect equilibrium price and quantity
  • Maximize consumer utility using formula MUa/Pa = MUb/Pb
  • Calculate ATC: TC/Q or AFC + AVC
  • Estimate of Marginal Costs = Wages/Marginal Product of Labor
  • Monopolistically competitive firm in long run equilibrium: Excess capacity, Breaks even
  • How a cartel acts like a monopoly
  • Marginal Revenue is perfectly elastic (constant) for a perfectly competitive firm; MR is also equal to price of good, the firm's demand, and average revenue
  • Firms minimize costs with the formula MPa/Pa = MPb/Pb
  • Shifts of supply and demand in a perfectly competitive labor market
  • Purpose of antitrust laws
  • Public Goods: nonexclusion and shared consumption (nonrivalrous)
  • Determine comparative and absolute advantage using a production possibilities frontier
  • Increasing opportunity costs vs constant opportunity costs on a production possibilities frontier
  • Elasticity and tax incidence; if elasticity is less than 1, then that party bears more of the tax burden
  • Calculate elasticity of demand using total revenue test
  • Shift factors of market supply
  • Calculate marginal product; change in output/change in input
  • Relationship between marginal costs and average total costs
  • Perfectly competitive firm produces where MR=MC=P=D=AR
  • Identify dominant strategies using a game theory matrix
  • Constant-cost industry perfectly competitive industry in the long run vs short run
  • Perfect competitors and monopolistic competitors break even in long run
  • MFC = MRP to determine how many workers to hire
  • Correcting positive and negative externalities
  • Identify surplus or shortage in a market
  • Income elasticity of demand to identify normal goods (positive) and inferior goods (negative)
  • Cross elasticity of demand to identify substitutes (positive) and complements (negative)
  • Maximize total utility, marginal utility is 0; also applies to total revenue and marginal revenue
  • Use long run average total costs to identify economies of scale, constant returns to scale, and diseconomies of scale
  • Average revenue is same thing as demand and therefore price of the good
  • Relationship between marginal costs and supply for a perfectly competitive firm and industry
  • Identify P and Q for an unregulated monopolist and regulated monopolist (fair return, socially optimal, maximize total revenue)
  • Identify the beginning of diminishing marginal returns
  • Effects of price floors or wage floors (minimum wage)
  • Progressive vs regressive tax
  • Consumer surplus and producer surplus
  • Substitution effect and the income effect
  • Monopolists always produce in the elastic region of their demand curve; MR is positive and total revenue falls with an increase in price
  • Price discrimination eats up the consumer surplus
  • Nearly impossible to enter the market dominated by a monopolist; barriers to entry; patents, economies of scale
  • Monopolists cost curves vs perfect competitors cost curves
  • Determinants of resource (labor) demand; higher prices, greater demand for the product, increased productivity
  • Allocative efficiency P=MC
  • Productive efficiency P=min ATC

If you review, identify, and study the above ideas, you can ace this exam!

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