AP Microeconomics Final Review Fall 2014

Principles of Economics Topics: Scarcity Economic Reasoning Positive vs. Normative Three Economic Questions PPF or PPC Absolute and Comparative Advantage Productive and Allocative efficiency

Principles of Economics What gave you problems Payments for factors Capital gets interest Labor gets wages Land gets rent Entrepreneurs get profit Productive efficiency It costs the least

Principles of Economics What gave you problems continued: Allocative efficiency Produce most wanted products Allocative and Productive Occur together at full production Best place to operate on the PPC Depends on what society wants

Supply and Demand Topics Law of Demand Law of Supply Equilibrium Determinants of Demand Law of Supply Determinants of Supply Equilibrium Surplus and Shortage Price Ceilings and Floors

Supply and Demand What gave you problems Demand vs, Quantity Demanded Determinants of Demand Substitutes and Compliments

Elasticity and Consumer Choice Topics Marginal Utility Price elasticity of demand Elasticity and total revenue Cross Elasticities Normal vs. Inferior Goods Price Elasticity of Supply Tax and Elasticity

Elasticity and Consumer Choice What gave you trouble: Law of diminishing marginal utility Inelastic supply Elasticity of supply in the long run and the short run Zero cross elasticity Price floors and surplus Price ceilings and shortages

Business Costs Topics Forms of Business Total, marginal, average product Long run and short run Fixed and variable costs Economies and diseconomies of scale Total, average, marginal cost

Business Costs What caused you problems Forms of business ownership Normal and economic profit Law of diminishing marginal return Relationship of marginal and average costs

Theory of the Firm Topics Profit maximization MR=MC Short run and long run equilibrium Government regulation Allocative and productive efficiency

Theory of the Firm What gave you problems: Demand curve for industry and firm Monopolistic competition Oligopoly Pure Competition Monopoly

Theory of the Firm Topics Quantity of Labor Marginal Product and Demand Marginal Productivity Theory Wages in Monopolistic and Competitive Markets Pure economic rent vs. quasi rent

Theory of the Firm What gave you problems Actions of Marginal Product Rise Fall Become negative Occupational licensing Inclusive Unionism

Public Choice Topics Economic function of government Economic Rent Tax Incidence

Public Choice What gave you problems: Definition of economic rent Results of raising and lowering interest rates Regressive tax

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