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Mr. John Tobias » AP Microeconomics

AP Microeconomics

AP MICROECONOMICS CONTENT GUIDE

I. Basic Economic Concepts (8-14%)    

   A.         Scarcity, choice, and opportunity cost

   B.         Production Possibilities Curve

   C.         Comparative advantage, specialization, and trade

   D.         Economic systems: Free Market and Command Economies

   E.         Circular Flow Model

   F.         Property rights and the role of incentives

   G.        Marginal analysis

II. Supply and Demand and Consumer Choice (20-30%) 

   A. Supply and demand (15-20%)

           1. Market equilibrium

           2. Determinants of supply and demand

           3. Price and quantity controls

             4. Elasticity

                   a. Price, income, and cross-price elasticities of demand

                   b. Price elasticity of supply

                   c. Total Revenue Test            

             5. Consumer surplus, producer surplus, and market efficiency

             6. Tax incidence and deadweight loss

      B. Theory of consumer choice (5-10%)

            1. Total utility and marginal utility

            2. Utility maximization: equalizing marginal utility per dollar

            3. Individual and market demand curves

            4. Income and substitution effects

III. Costs of Production and Perfect Comp. (15-25%) 

 A. Production and costs

      1. Production functions: short and long run

      2. Marginal product and diminishing returns

      3. Short-run costs

      4. Long-run costs and economies of scale

      5. Cost minimizing input combination

 B. Firm Behavior and Market Structure

      1. Profit:

          a. Accounting versus economic profits

          b. Normal profit or zero economic profit

          c. Profit maximization: MR=MC rule

2. Perfect competition

           a. Profit maximization

           b. Short-run supply and shutdown decision

           c. Firm and market behaviors in short-run and long-run equilibrium

           d. Efficiency and perfect competition

IV. Imperfect Competition (15-25%)    

   1. Monopoly

       a. Sources of market power

       b. Profit maximization

       c. Inefficiency of monopoly

       d. Price discrimination

2. Oligopoly

         a. Interdependence, collusion, and cartels

         b. Game theory and strategic behavior

3. Monopolistic competition

         a. Product differentiation and role of advertising

         b. Profit maximization

         c. Short-run and long-run equilibrium

         d. Excess capacity and inefficiency

V. Factor Markets (10-18%)        

   A. Derived factor demand

   B. Marginal revenue product 

   C. Labor market and firms' hiring of labor

   D. Market distribution of income

IV. Market Failure and the Role of Government (12-18%)

     A. Externalities

           1. Marginal social benefit and marginal social cost

           2. Positive externalities

           3. Negative externalities

           4. Remedies

     B. Public goods

         1. Public versus private goods

           2. Provision of public goods

     C. Public policy to promote competition

           1. Antitrust policy

           2. Regulation

     D. Income distribution

           1. Equity

           2. Sources of income inequality   

           3. Lorenz Curve

 

THE AP EXAM FORMAT

1. Multiple-Choice (70 minutes, two-thirds of final grade)
60 multiple choice questions

 

2. Free-Response (60 minutes including a 10 minute reading period, one-third of final grade)
     1 long free-response essay question
     2 short free-response essay questions

 

  • The essay questions require analysis of economic situations and the utilization of economic principles. 
  • Answers need to demonstrate analytical skill and good organization, along with explanatory diagrams that augment the analysis. 
  • Some of the questions may include graphs that need interpretation and some questions may require one or more graphs to be drawn as part of the answer. 

     

    The college board recommends that students spend half their time on the long essay question and split their remaining time equally on the two short questions. 

     The long question will generally involve several related content areas and the shorter ones will focus on a single area.

     

    GRAPHS

    Graphing skills are an essential prerequisite. Much of the course centers on the manipulation of graphs.
  1. If a question requires you to draw a graph, you must do so to receive full credit.  If the instructions “using a correctly and completely labeled graph” appear in the question, there will be no points given to an answer that does not contain a graph. 

    b.    Points are allocated to labels, and to correct illustrations of a state (such as equilibrium) or changes that result from events described in the question 

     

    Key Graphs – AP Microeconomics
  • Production Possibilities Curve
  • Demand and Supply
  • Demand and Supply: Price Controls
  • Demand and Supply: Excise Tax
  • Demand and Supply: Trade and Tariffs
  • Side-by-Side Product Market and Firm
  • Monopoly
  • Price Discriminating Monopoly
  • Monopolistic Competition
  • Game Theory Matrix
  • Side-by-Side Resource Market and Firm
  • Monopsony
  • Negative Externality
  • Positive Externality
  • Lorenz Curve