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COMMON MISTAKES ON THE AP MICRO EXAM
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A change in Demand versus a change in the Quantity Demanded
Change in Demand
√ Moves the curve
•Income
•Future Expectations
•# of Buyers
•Consumer Information
•Taste and Preference
•Substitues and Complements
Change in Quantity Demanded
√ Moves Along the SAMEcurve
• Caused only by Price change.
![Page 3: COMMON MISTAKES ON THE AP MICRO EXAM · Consumer and Producer Surplus √ The value in excess of the purchase price √ The income the firm gets in excess of its marginal costs. D](https://reader035.vdocuments.us/reader035/viewer/2022071019/5fd2ef2ca53549383d5b680f/html5/thumbnails/3.jpg)
Consumer and Producer Surplus√ The value in excess of the purchase price
√ The income the firm gets in excess of its marginal costs
D
SP1
Qe
P
Q
CS
PS
![Page 4: COMMON MISTAKES ON THE AP MICRO EXAM · Consumer and Producer Surplus √ The value in excess of the purchase price √ The income the firm gets in excess of its marginal costs. D](https://reader035.vdocuments.us/reader035/viewer/2022071019/5fd2ef2ca53549383d5b680f/html5/thumbnails/4.jpg)
Price Floor and Price Ceiling
D
S
Pc Shortage
P1
Qe
P
Q
PfSurplus
![Page 5: COMMON MISTAKES ON THE AP MICRO EXAM · Consumer and Producer Surplus √ The value in excess of the purchase price √ The income the firm gets in excess of its marginal costs. D](https://reader035.vdocuments.us/reader035/viewer/2022071019/5fd2ef2ca53549383d5b680f/html5/thumbnails/5.jpg)
Ed = % change in Qd% change in P
PRICE
Elasticity
E c = % Δ Quantity of X%Δ Price of Y
CROSS
INCOME E i = % Δ Quantity%Δ Income
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Dead Weight Loss When the Price is Below P*
Q/t
P
Demand
SupplyA
P* C
0 Q’ Q*
E
FP’
B
• Value to the Consumer: • 0AEQ’
• Consumers Pay Producers: • OP’FQ’
• The Variable Cost to Producers: • OBFQ’
• Consumer Surplus: • P’AEF
• Producer Surplus: • BP’F
• DWL• FEC
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Tax RevenuesEfficiency Loss of a TaxRole of ElasticitiesQualifications
•Redistributive Goals•Reducing Negative Externalities
TAX INCIDENCE ANDEFFICIENCY LOSS
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Perfectly Inelastic Demand
D
Q/t
P
S2
Q1=Q2
P2 S1
P1
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Perfectly Elastic Demand
Q/t
P
D
S2
P1=P2
Q2
S1
Q1
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Inelastic Demand
(at moderate prices)
P
Q/t
D
S1
P1
Q1Q2
S2
P2
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Elastic Demand(at moderate prices)
Q/t
P
Q1
D
S1
P1
S2
P2
Q2
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DIMINISHING RETURNS
• Explanation:
As additional units of a variable input (labor) are added to a fixed input (capital), at some point the additional output resulting from the addition of one more unit of variable input declines. This decline is referred to as diminishing marginal return. At this point, total product increases at a decreasing rate.
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• Rationale:
As the variable input increases and the fixed input, by definition, remains the same, there is less fixed input with which the variable input can be combined.
Example: As more workers are added but capital remains the same, there is less
capital per worker.
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Law of Diminishing Returns
SHORT-RUN PRODUCTIONRELATIONSHIPS
Tota
l Pro
duct
, TP
Quantity of Labor
Aver
age
Prod
uct,
AP,
and
mar
gina
l pro
duct
, MP
Quantity of Labor
Total Product
MarginalProduct
AverageProduct
IncreasingMarginalReturns
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Law of Diminishing Returns
SHORT-RUN PRODUCTIONRELATIONSHIPS
Tota
l Pro
duct
, TP
Quantity of Labor
Aver
age
Prod
uct,
AP,
and
mar
gina
l pro
duct
, MP
Quantity of Labor
Total Product
MarginalProduct
AverageProduct
DiminishingMarginalReturns
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Law of Diminishing Returns
SHORT-RUN PRODUCTIONRELATIONSHIPS
Tota
l Pro
duct
, TP
Quantity of Labor
Aver
age
Prod
uct,
AP,
and
mar
gina
l pro
duct
, MP
Quantity of Labor
Total Product
MarginalProduct
AverageProduct
NegativeMarginalReturns
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Two Approaches to Find the PROFIT MAXIMIZING
QUANTITY ( PRICE)
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$1,8001,7001,6001,5001,4001,3001,2001,1001,000
900800700600500400300200100
0
Tota
l rev
enue
and
tota
l cos
tTotal
Revenue
TotalCost
MaximumEconomic
Profits$299
Break-Even Point(Normal Profit)
Break-Even Point(Normal Profit)
1 2 3 4 5 6 7 8 9 10 11 12 13 14
TOTAL REVENUE-TOTAL COST APPROACH
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$200
150
100
50
0
Cos
t and
Rev
enue
1 2 3 4 5 6 7 8 9 10
MC
MR
AVCATC
Economic Profit
$131.00
$97.78
MARGINAL REVENUE-MARGINAL COST APPROACH
Profit Maximization Position
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Key Micro Formulas
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RELATIONSHIP ECONOMIC INTERPRETATION
MR = MC When MR = MC, we know that the firm has chosen the output that maximizes profits.
P > ATC Firm is earning ECONOMIC PROFITS
P = ATC Firm is earning NORMAL PROFIT (Break-Even Point) (economic profit = 0)
P < ATCP > AVC
Loss Minimization
P = AVC SHUTDOWN POINT (firm will loseTFC if they produce or Shutdown and produce 0.
P < AVC Firm does not produce
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Finding the Perfectly Competitive Firm’s
Supply Curve
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Cos
t and
Rev
enue
, (do
llars
)MC
MR1
AVC
ATC
MARGINAL REVENUE-MARGINAL COST APPROACH
Quantity Supplied
MR2
MR3
MR4
MR5
P1
P2
P3
P4
P5
Q2 Q3 Q4 Q5
Marginal Cost & Short-Run Supply
Do notProduce –Below AVC
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Cos
t and
Rev
enue
, (do
llars
)MC
MR1
MARGINAL REVENUE-MARGINAL COST APPROACH
Quantity Supplied
MR2
MR3
MR4
MR5
P1
P2
P3
P4
P5
Q2 Q3 Q4 Q5
Marginal Cost & Short-Run SupplyYields theShort-Run
Supply Curve
Supply
NoProductionBelow AVC
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Long Run Equilibrium (Perfectly Competitive
Firm)
• Productive Efficiency• Allocative Efficiency
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P MR
Q
MCATC
Quantity
Pric
e
Price = MC = Minimum ATC(normal profit)
LONG-RUN EQUILIBRIUM FOR A COMPETITIVE FIRM
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How an Increase in Demand Changes Long-Run Equilibrium for the
Firm and Industry
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Temporary Profits and the ReestablishmentOf Long-Run Equilibrium
S1
MCATC
P
Q100
P
Q100,000
IndustryFirm(price taker)
$605040
$605040
PROFIT MAXIMIZATION IN THE LONG-RUN
MR
D1
![Page 29: COMMON MISTAKES ON THE AP MICRO EXAM · Consumer and Producer Surplus √ The value in excess of the purchase price √ The income the firm gets in excess of its marginal costs. D](https://reader035.vdocuments.us/reader035/viewer/2022071019/5fd2ef2ca53549383d5b680f/html5/thumbnails/29.jpg)
An increase in demand increases profits…
MR
D1
MCATC
P
Q100
P
Q100,000
IndustryFirm(price taker)
$605040
$605040
PROFIT MAXIMIZATION IN THE LONG-RUN
D2
EconomicProfits
S1
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New Competitors increase supply and lowerPrices decrease economic profits
MR
D1
MCATC
P
Q100
P
Q100,000
IndustryFirm(price taker)
$605040
$605040
PROFIT MAXIMIZATION IN THE LONG-RUN
D2
Zero EconomicProfits
S1S2
![Page 31: COMMON MISTAKES ON THE AP MICRO EXAM · Consumer and Producer Surplus √ The value in excess of the purchase price √ The income the firm gets in excess of its marginal costs. D](https://reader035.vdocuments.us/reader035/viewer/2022071019/5fd2ef2ca53549383d5b680f/html5/thumbnails/31.jpg)
How an Decrease in Demand Changes Long-Run Equilibrium for the
Firm and Industry
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Decreases in demand, Losses and the Reestablishment of Long-Run Equilibrium
S1
MCATC
P
Q100
P
Q100,000
IndustryFirm(price taker)
$605040
$605040
PROFIT MAXIMIZATION IN THE LONG-RUN
D1
MR
![Page 33: COMMON MISTAKES ON THE AP MICRO EXAM · Consumer and Producer Surplus √ The value in excess of the purchase price √ The income the firm gets in excess of its marginal costs. D](https://reader035.vdocuments.us/reader035/viewer/2022071019/5fd2ef2ca53549383d5b680f/html5/thumbnails/33.jpg)
A decrease in demand creates losses…
MR
D1
MCATC
P
Q100
P
Q100,000
IndustryFirm(price taker)
$605040
$605040
PROFIT MAXIMIZATION IN THE LONG-RUN
D2
EconomicLosses
S1
![Page 34: COMMON MISTAKES ON THE AP MICRO EXAM · Consumer and Producer Surplus √ The value in excess of the purchase price √ The income the firm gets in excess of its marginal costs. D](https://reader035.vdocuments.us/reader035/viewer/2022071019/5fd2ef2ca53549383d5b680f/html5/thumbnails/34.jpg)
MR
D1
MCATC
P
Q100
P
Q100,000
IndustryFirm(price taker)
$605040
$605040
PROFIT MAXIMIZATION IN THE LONG-RUN
D2
Return to ZeroEconomic Profits
S1
S3
Competitors with losses decrease supply andprices return to zero economic profits
![Page 35: COMMON MISTAKES ON THE AP MICRO EXAM · Consumer and Producer Surplus √ The value in excess of the purchase price √ The income the firm gets in excess of its marginal costs. D](https://reader035.vdocuments.us/reader035/viewer/2022071019/5fd2ef2ca53549383d5b680f/html5/thumbnails/35.jpg)
Price and Marginal Revenue for a
Monopoly
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MONOPOLY REVENUES & COSTS
Dol
lars
Dol
lars
$200
150
200
50
$750
500
250
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18
Q0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18
Q
![Page 37: COMMON MISTAKES ON THE AP MICRO EXAM · Consumer and Producer Surplus √ The value in excess of the purchase price √ The income the firm gets in excess of its marginal costs. D](https://reader035.vdocuments.us/reader035/viewer/2022071019/5fd2ef2ca53549383d5b680f/html5/thumbnails/37.jpg)
MONOPOLY REVENUES & COSTS
Dol
lars
Dol
lars
$200
150
200
50
$750
500
250
MR
Elastic
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18
DQ
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18
TR
Q
![Page 38: COMMON MISTAKES ON THE AP MICRO EXAM · Consumer and Producer Surplus √ The value in excess of the purchase price √ The income the firm gets in excess of its marginal costs. D](https://reader035.vdocuments.us/reader035/viewer/2022071019/5fd2ef2ca53549383d5b680f/html5/thumbnails/38.jpg)
MONOPOLY REVENUES & COSTS
Q
Dol
lars
Dol
lars
$200
150
200
50
$750
500
250TR
MR D
InelasticElastic
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18Q
0 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18
![Page 39: COMMON MISTAKES ON THE AP MICRO EXAM · Consumer and Producer Surplus √ The value in excess of the purchase price √ The income the firm gets in excess of its marginal costs. D](https://reader035.vdocuments.us/reader035/viewer/2022071019/5fd2ef2ca53549383d5b680f/html5/thumbnails/39.jpg)
Failing to remember how to shade the area of ECONOMIC PROFIT
THE PROFIT-MAXIMIZING
POSITION OF A MONOPOLY
![Page 40: COMMON MISTAKES ON THE AP MICRO EXAM · Consumer and Producer Surplus √ The value in excess of the purchase price √ The income the firm gets in excess of its marginal costs. D](https://reader035.vdocuments.us/reader035/viewer/2022071019/5fd2ef2ca53549383d5b680f/html5/thumbnails/40.jpg)
Profit Maximization Under Monopoly
D
MC
ATC
MR
$94
$122Profit
MR = MC
ProfitPer Unit
OUTPUT AND PRICE DETERMINATION
Q
200
175
150
125
100
75
50
25
0 1 2 3 4 5 6 7 8 9 10
Pric
e, c
osts
, and
reve
nue
Remember the MR=MC Rule?
![Page 41: COMMON MISTAKES ON THE AP MICRO EXAM · Consumer and Producer Surplus √ The value in excess of the purchase price √ The income the firm gets in excess of its marginal costs. D](https://reader035.vdocuments.us/reader035/viewer/2022071019/5fd2ef2ca53549383d5b680f/html5/thumbnails/41.jpg)
And the Shading of Economic Losses
LOSS MINIMIZATION OF THE IMPERFECT
COMPETITOR
![Page 42: COMMON MISTAKES ON THE AP MICRO EXAM · Consumer and Producer Surplus √ The value in excess of the purchase price √ The income the firm gets in excess of its marginal costs. D](https://reader035.vdocuments.us/reader035/viewer/2022071019/5fd2ef2ca53549383d5b680f/html5/thumbnails/42.jpg)
Loss Minimization Under Monopoly
D
MCATC
MR
APm
Loss
MR = MC
LossPer Unit
OUTPUT AND PRICE DETERMINATION
Q
200
175
150
125
100
75
50
25
0 1 2 3 4 5 6 7 8 9 10
Pric
e, c
osts
, and
reve
nue
AVC
Qm
V
Since Pm exceeds AVC,the firm will produce
![Page 43: COMMON MISTAKES ON THE AP MICRO EXAM · Consumer and Producer Surplus √ The value in excess of the purchase price √ The income the firm gets in excess of its marginal costs. D](https://reader035.vdocuments.us/reader035/viewer/2022071019/5fd2ef2ca53549383d5b680f/html5/thumbnails/43.jpg)
Monopoly
vs.
Competition
![Page 44: COMMON MISTAKES ON THE AP MICRO EXAM · Consumer and Producer Surplus √ The value in excess of the purchase price √ The income the firm gets in excess of its marginal costs. D](https://reader035.vdocuments.us/reader035/viewer/2022071019/5fd2ef2ca53549383d5b680f/html5/thumbnails/44.jpg)
PURE COMPETITION
MONOPOLY
MR = MC
The firms maximizes profit.
MR = MC
The firm maximizes profit.P = ATC
The firms just BREAK-EVEN (NORMAL PROFITS) in the Long Run.
P > ATC
Long Run ECONOMIC PROFITS.
P = min ATC
Firm is forced to operate with maximum productive efficiency.
--------------------------------------PRODUCTIVE EFFICIENCY
(Least-Cost Method Production)
P > min ATC
Firm is not forced to operate with maximum productive efficiency.
PRODUCTIVE INEFFICIENCY
(Least-Cost Method Production not necessary)
P = MC
There is an optimal allocation of resources.
ALLOCATIVE EFFICIENCY
P > MC
There is an UNDERALLOCATION of resources.
ALLOCATIVE INEFFICIENCY
P = MR
The firm’s DEMAND CURVE is infinitely ELASTIC.
P > MR
The firm’s DEMAND CURVE is less than infinitely ELASTIC.
![Page 45: COMMON MISTAKES ON THE AP MICRO EXAM · Consumer and Producer Surplus √ The value in excess of the purchase price √ The income the firm gets in excess of its marginal costs. D](https://reader035.vdocuments.us/reader035/viewer/2022071019/5fd2ef2ca53549383d5b680f/html5/thumbnails/45.jpg)
Q
INEFFICIENCY OF PURE MONOPOLYP
DMR
S = MC
Pc
Pm
QcQm
At MR=MCA monopolistwill sell less
units at ahigher price
than incompetition
An industry in pure competitionsells where supply and
demand are equal
![Page 46: COMMON MISTAKES ON THE AP MICRO EXAM · Consumer and Producer Surplus √ The value in excess of the purchase price √ The income the firm gets in excess of its marginal costs. D](https://reader035.vdocuments.us/reader035/viewer/2022071019/5fd2ef2ca53549383d5b680f/html5/thumbnails/46.jpg)
Q
INEFFICIENCY OF PURE MONOPOLYP
DMR
S = MC
Pc
Pm
QcQm
At MR=MCA monopolistwill sell less
units at ahigher price
than incompetition
Monopoly pricing effectivelycreates an income transfer from
buyers to the seller!
![Page 47: COMMON MISTAKES ON THE AP MICRO EXAM · Consumer and Producer Surplus √ The value in excess of the purchase price √ The income the firm gets in excess of its marginal costs. D](https://reader035.vdocuments.us/reader035/viewer/2022071019/5fd2ef2ca53549383d5b680f/html5/thumbnails/47.jpg)
Not being able to GRAPH a Natural Monopoly and the Socially- Optimal
Outputand
Fair-Return Output Levels
![Page 48: COMMON MISTAKES ON THE AP MICRO EXAM · Consumer and Producer Surplus √ The value in excess of the purchase price √ The income the firm gets in excess of its marginal costs. D](https://reader035.vdocuments.us/reader035/viewer/2022071019/5fd2ef2ca53549383d5b680f/html5/thumbnails/48.jpg)
Natural MonopoliesRate RegulationSocially Optimum Price
P = MCFair-Return Price
P = ATCDilemma of Regulation
REGULATED MONOPOLY
Graphically…
![Page 49: COMMON MISTAKES ON THE AP MICRO EXAM · Consumer and Producer Surplus √ The value in excess of the purchase price √ The income the firm gets in excess of its marginal costs. D](https://reader035.vdocuments.us/reader035/viewer/2022071019/5fd2ef2ca53549383d5b680f/html5/thumbnails/49.jpg)
REGULATED MONOPOLY
Q
DMR
MCATC
P
Pric
e an
d C
osts
Monopoly PriceMR = MC
Qm
Pm
![Page 50: COMMON MISTAKES ON THE AP MICRO EXAM · Consumer and Producer Surplus √ The value in excess of the purchase price √ The income the firm gets in excess of its marginal costs. D](https://reader035.vdocuments.us/reader035/viewer/2022071019/5fd2ef2ca53549383d5b680f/html5/thumbnails/50.jpg)
REGULATED MONOPOLY
Q
DMR
MCATC
P
Pric
e an
d C
osts
Socially-OptimumPrice
P = MC
Qr
Pr
![Page 51: COMMON MISTAKES ON THE AP MICRO EXAM · Consumer and Producer Surplus √ The value in excess of the purchase price √ The income the firm gets in excess of its marginal costs. D](https://reader035.vdocuments.us/reader035/viewer/2022071019/5fd2ef2ca53549383d5b680f/html5/thumbnails/51.jpg)
REGULATED MONOPOLY
Q
DMR
MCATC
P
Pric
e an
d C
osts
Fair-Return PriceNormal Profit Only
Qf
Pf
![Page 52: COMMON MISTAKES ON THE AP MICRO EXAM · Consumer and Producer Surplus √ The value in excess of the purchase price √ The income the firm gets in excess of its marginal costs. D](https://reader035.vdocuments.us/reader035/viewer/2022071019/5fd2ef2ca53549383d5b680f/html5/thumbnails/52.jpg)
REGULATED MONOPOLY
Q
DMR
MCATC
P
Pric
e an
d C
osts
MR = MC
Fair-Return Price
Socially-OptimumPrice
Qm Qf Qr
Dilemma of RegulationWhich Price?
Pm
Pf
Pr
![Page 53: COMMON MISTAKES ON THE AP MICRO EXAM · Consumer and Producer Surplus √ The value in excess of the purchase price √ The income the firm gets in excess of its marginal costs. D](https://reader035.vdocuments.us/reader035/viewer/2022071019/5fd2ef2ca53549383d5b680f/html5/thumbnails/53.jpg)
Single PRICE Monopoly
vs.
Price Discrimination
![Page 54: COMMON MISTAKES ON THE AP MICRO EXAM · Consumer and Producer Surplus √ The value in excess of the purchase price √ The income the firm gets in excess of its marginal costs. D](https://reader035.vdocuments.us/reader035/viewer/2022071019/5fd2ef2ca53549383d5b680f/html5/thumbnails/54.jpg)
ConditionsMonopoly PowerMarket SegregationNo Resale
ConsequencesMore ProfitMore Production
PRICE DISCRIMINATION
Graphically…
![Page 55: COMMON MISTAKES ON THE AP MICRO EXAM · Consumer and Producer Surplus √ The value in excess of the purchase price √ The income the firm gets in excess of its marginal costs. D](https://reader035.vdocuments.us/reader035/viewer/2022071019/5fd2ef2ca53549383d5b680f/html5/thumbnails/55.jpg)
QDMR
MC
ATC
P
Q1
Pric
e an
d C
osts
Economic profits witha single MR=MC
price
PRICE DISCRIMINATION
![Page 56: COMMON MISTAKES ON THE AP MICRO EXAM · Consumer and Producer Surplus √ The value in excess of the purchase price √ The income the firm gets in excess of its marginal costs. D](https://reader035.vdocuments.us/reader035/viewer/2022071019/5fd2ef2ca53549383d5b680f/html5/thumbnails/56.jpg)
QD
MC
ATC
P
Q1
Pric
e an
d C
osts
PRICE DISCRIMINATION
Q2
A perfectly discriminatingmonopolist has MR=D,producing more product
and more profit!
MR=D
![Page 57: COMMON MISTAKES ON THE AP MICRO EXAM · Consumer and Producer Surplus √ The value in excess of the purchase price √ The income the firm gets in excess of its marginal costs. D](https://reader035.vdocuments.us/reader035/viewer/2022071019/5fd2ef2ca53549383d5b680f/html5/thumbnails/57.jpg)
QD
MC
ATC
P
Q1
Pric
e an
d C
osts
Economic profits withprice discrimination
PRICE DISCRIMINATION
Q2
MR=D
![Page 58: COMMON MISTAKES ON THE AP MICRO EXAM · Consumer and Producer Surplus √ The value in excess of the purchase price √ The income the firm gets in excess of its marginal costs. D](https://reader035.vdocuments.us/reader035/viewer/2022071019/5fd2ef2ca53549383d5b680f/html5/thumbnails/58.jpg)
Monopolistic Competition
What is it?Monopoly?
Competition?
![Page 59: COMMON MISTAKES ON THE AP MICRO EXAM · Consumer and Producer Surplus √ The value in excess of the purchase price √ The income the firm gets in excess of its marginal costs. D](https://reader035.vdocuments.us/reader035/viewer/2022071019/5fd2ef2ca53549383d5b680f/html5/thumbnails/59.jpg)
D
MR
P1
ATCPr
ice
and
Cos
ts
Q1
EconomicProfits
Expect New Competitors
PRICE AND OUTPUT INMONOPOLISTIC COMPETITION
Quantity
A1
MC
![Page 60: COMMON MISTAKES ON THE AP MICRO EXAM · Consumer and Producer Surplus √ The value in excess of the purchase price √ The income the firm gets in excess of its marginal costs. D](https://reader035.vdocuments.us/reader035/viewer/2022071019/5fd2ef2ca53549383d5b680f/html5/thumbnails/60.jpg)
D
MR
P1
ATCPr
ice
and
Cos
ts
Q1
EconomicProfits
Expect New Competitors
PRICE AND OUTPUT INMONOPOLISTIC COMPETITION
Quantity
A1
New competition drives down theprice level – leading to economic
losses in the short run
MC
![Page 61: COMMON MISTAKES ON THE AP MICRO EXAM · Consumer and Producer Surplus √ The value in excess of the purchase price √ The income the firm gets in excess of its marginal costs. D](https://reader035.vdocuments.us/reader035/viewer/2022071019/5fd2ef2ca53549383d5b680f/html5/thumbnails/61.jpg)
D
MR
MC
P2
ATCPr
ice
and
Cos
ts
Q2
EconomicLosses
PRICE AND OUTPUT INMONOPOLISTIC COMPETITION
Quantity
A2
![Page 62: COMMON MISTAKES ON THE AP MICRO EXAM · Consumer and Producer Surplus √ The value in excess of the purchase price √ The income the firm gets in excess of its marginal costs. D](https://reader035.vdocuments.us/reader035/viewer/2022071019/5fd2ef2ca53549383d5b680f/html5/thumbnails/62.jpg)
D
MR
MC
P2
ATCPr
ice
and
Cos
ts
Q2
EconomicLosses
PRICE AND OUTPUT INMONOPOLISTIC COMPETITION
Quantity
A2With economic losses, firms willexit the market – Stability occurswhen economic profits are zero
![Page 63: COMMON MISTAKES ON THE AP MICRO EXAM · Consumer and Producer Surplus √ The value in excess of the purchase price √ The income the firm gets in excess of its marginal costs. D](https://reader035.vdocuments.us/reader035/viewer/2022071019/5fd2ef2ca53549383d5b680f/html5/thumbnails/63.jpg)
D
MR
MC
P3= A3
ATCPr
ice
and
Cos
ts
Q3
PRICE AND OUTPUT INMONOPOLISTIC COMPETITION
Quantity
Long-Run EquilibriumNormalProfitOnly
![Page 64: COMMON MISTAKES ON THE AP MICRO EXAM · Consumer and Producer Surplus √ The value in excess of the purchase price √ The income the firm gets in excess of its marginal costs. D](https://reader035.vdocuments.us/reader035/viewer/2022071019/5fd2ef2ca53549383d5b680f/html5/thumbnails/64.jpg)
NOW,
for theRESOURCE (Factor)
MARKETS
![Page 65: COMMON MISTAKES ON THE AP MICRO EXAM · Consumer and Producer Surplus √ The value in excess of the purchase price √ The income the firm gets in excess of its marginal costs. D](https://reader035.vdocuments.us/reader035/viewer/2022071019/5fd2ef2ca53549383d5b680f/html5/thumbnails/65.jpg)
Remember…
Product Market:MR = MC
Resource Market:MRP = MFC
![Page 66: COMMON MISTAKES ON THE AP MICRO EXAM · Consumer and Producer Surplus √ The value in excess of the purchase price √ The income the firm gets in excess of its marginal costs. D](https://reader035.vdocuments.us/reader035/viewer/2022071019/5fd2ef2ca53549383d5b680f/html5/thumbnails/66.jpg)
Units ofResource
TotalProduct(Output)
Marginalproduct
(MP)Product
PriceTotal
Revenue
MarginalRevenue
Product (MRP)
]]]]]]
0 1 2 3 4 5 6 7 8 Q
P 141210
8642R
esou
rce
pric
e(w
age
rate
)
Quantity of resource demanded
Pure CompetitionMRP AS A DEMAND SCHEDULE
]]]]]]
01
07 7 $2
2$ 014
$ 14
![Page 67: COMMON MISTAKES ON THE AP MICRO EXAM · Consumer and Producer Surplus √ The value in excess of the purchase price √ The income the firm gets in excess of its marginal costs. D](https://reader035.vdocuments.us/reader035/viewer/2022071019/5fd2ef2ca53549383d5b680f/html5/thumbnails/67.jpg)
Units ofResource
TotalProduct(Output)
Marginalproduct
(MP)Product
PriceTotal
Revenue
MarginalRevenue
Product (MRP)
]]]]]]
0 1 2 3 4 5 6 7 8 Q
P 141210
8642R
esou
rce
pric
e(w
age
rate
)
Quantity of resource demanded
Pure CompetitionMRP AS A DEMAND SCHEDULE
]]]]]]
012
07
13
76
$222
$ 01426
$ 1412
![Page 68: COMMON MISTAKES ON THE AP MICRO EXAM · Consumer and Producer Surplus √ The value in excess of the purchase price √ The income the firm gets in excess of its marginal costs. D](https://reader035.vdocuments.us/reader035/viewer/2022071019/5fd2ef2ca53549383d5b680f/html5/thumbnails/68.jpg)
Units ofResource
TotalProduct(Output)
Marginalproduct
(MP)Product
PriceTotal
Revenue
MarginalRevenue
Product (MRP)
]]]]]]
0 1 2 3 4 5 6 7 8 Q
P 141210
8642R
esou
rce
pric
e(w
age
rate
)
Quantity of resource demanded
Pure CompetitionMRP AS A DEMAND SCHEDULE
]]]]]]
0123
07
1318
765
$2222
$ 0142636
$ 141210
![Page 69: COMMON MISTAKES ON THE AP MICRO EXAM · Consumer and Producer Surplus √ The value in excess of the purchase price √ The income the firm gets in excess of its marginal costs. D](https://reader035.vdocuments.us/reader035/viewer/2022071019/5fd2ef2ca53549383d5b680f/html5/thumbnails/69.jpg)
Units ofResource
TotalProduct(Output)
Marginalproduct
(MP)Product
PriceTotal
Revenue
MarginalRevenue
Product (MRP)
]]]]]]
0 1 2 3 4 5 6 7 8 Q
P 141210
8642R
esou
rce
pric
e(w
age
rate
)
Quantity of resource demanded
Pure CompetitionMRP AS A DEMAND SCHEDULE
]]]]]]
01234567
07
131822252728
7654321
$22222222
$ 014263644505456
$ 1412108642
The purely competitiveseller’s demand fora resource
![Page 70: COMMON MISTAKES ON THE AP MICRO EXAM · Consumer and Producer Surplus √ The value in excess of the purchase price √ The income the firm gets in excess of its marginal costs. D](https://reader035.vdocuments.us/reader035/viewer/2022071019/5fd2ef2ca53549383d5b680f/html5/thumbnails/70.jpg)
Units ofResource
TotalProduct(Output)
Marginalproduct
(MP)Product
PriceTotal
Revenue
MarginalRevenue
Product (MRP)
]]]]]]
0 1 2 3 4 5 6 7 8 Q
P 141210
8642R
esou
rce
pric
e(w
age
rate
)
Quantity of resource demanded
Pure CompetitionMRP AS A DEMAND SCHEDULE
]]]]]]
01234567
07
131822252728
7654321
$22222222
$ 014263644505456
$ 1412108642
The purely competitiveseller’s demand fora resource
Now, consider the caseof resource demand under
Imperfect Competition
![Page 71: COMMON MISTAKES ON THE AP MICRO EXAM · Consumer and Producer Surplus √ The value in excess of the purchase price √ The income the firm gets in excess of its marginal costs. D](https://reader035.vdocuments.us/reader035/viewer/2022071019/5fd2ef2ca53549383d5b680f/html5/thumbnails/71.jpg)
Units ofResource
TotalProduct(Output)
Marginalproduct
(MP)Product
PriceTotal
Revenue
MarginalRevenue
Product (MRP)
]]]]]]
0 1 2 3 4 5 6 7 8 Q
P 141210
8642R
esou
rce
pric
e(w
age
rate
)
Quantity of resource demanded
Imperfect CompetitionMRP AS A DEMAND SCHEDULE
]]]]]]
01234567
07
131822252728
7654321
$2.802.602.402.202.001.851.751.65
$ 018.2031.2039.6044.0046.2547.2546.20
$ 18.2013.008.404.402.251.00-1.05
The imperfectlyCompetitive seller’sdemand for a resource
![Page 72: COMMON MISTAKES ON THE AP MICRO EXAM · Consumer and Producer Surplus √ The value in excess of the purchase price √ The income the firm gets in excess of its marginal costs. D](https://reader035.vdocuments.us/reader035/viewer/2022071019/5fd2ef2ca53549383d5b680f/html5/thumbnails/72.jpg)
LABOR MARKETS:
Wage Determination
![Page 73: COMMON MISTAKES ON THE AP MICRO EXAM · Consumer and Producer Surplus √ The value in excess of the purchase price √ The income the firm gets in excess of its marginal costs. D](https://reader035.vdocuments.us/reader035/viewer/2022071019/5fd2ef2ca53549383d5b680f/html5/thumbnails/73.jpg)
![Page 74: COMMON MISTAKES ON THE AP MICRO EXAM · Consumer and Producer Surplus √ The value in excess of the purchase price √ The income the firm gets in excess of its marginal costs. D](https://reader035.vdocuments.us/reader035/viewer/2022071019/5fd2ef2ca53549383d5b680f/html5/thumbnails/74.jpg)
PURELY COMPETITIVELABOR MARKET
Purely competitive labor market:Many FirmsNumerous Qualified Workers“Wage Taker” BehaviorMarket Demand for LaborMarket Supply of Labor
![Page 75: COMMON MISTAKES ON THE AP MICRO EXAM · Consumer and Producer Surplus √ The value in excess of the purchase price √ The income the firm gets in excess of its marginal costs. D](https://reader035.vdocuments.us/reader035/viewer/2022071019/5fd2ef2ca53549383d5b680f/html5/thumbnails/75.jpg)
Non-LaborCosts
LaborCosts
LABOR SUPPLY AND DEMANDPURELY COMPETITIVE MARKET
Labor Market
S
D = MRP(Σ mrp’s)
Wc
(1000)
Individual Firm
S = MRC
d = mrp
Wc
Quantity of Labor
Wag
e R
ate
(dol
lars
)
Quantity of Labor
($10)
(5)
$10$10$10$10$10$10
IncludesNormalProfit
![Page 76: COMMON MISTAKES ON THE AP MICRO EXAM · Consumer and Producer Surplus √ The value in excess of the purchase price √ The income the firm gets in excess of its marginal costs. D](https://reader035.vdocuments.us/reader035/viewer/2022071019/5fd2ef2ca53549383d5b680f/html5/thumbnails/76.jpg)
Wag
e R
ate
(dol
lars
)S
Quantity of Labor
MONOPSONISTICLABOR MARKET
In monopsonyMRC lies abovethe supply curve
![Page 77: COMMON MISTAKES ON THE AP MICRO EXAM · Consumer and Producer Surplus √ The value in excess of the purchase price √ The income the firm gets in excess of its marginal costs. D](https://reader035.vdocuments.us/reader035/viewer/2022071019/5fd2ef2ca53549383d5b680f/html5/thumbnails/77.jpg)
Wag
e R
ate
(dol
lars
)
MRP
S
Wm
Quantity of Labor
MRC
Qm
MONOPSONISTICLABOR MARKET
MRP = MRC
Qm units oflabor hired
![Page 78: COMMON MISTAKES ON THE AP MICRO EXAM · Consumer and Producer Surplus √ The value in excess of the purchase price √ The income the firm gets in excess of its marginal costs. D](https://reader035.vdocuments.us/reader035/viewer/2022071019/5fd2ef2ca53549383d5b680f/html5/thumbnails/78.jpg)
Wag
e R
ate
(dol
lars
)
MRP
S
Wm
Quantity of Labor
MRC
Wc
Qm Qc
The competitivesolution would
result in a higherwage and greater
employment
MONOPSONISTICLABOR MARKET
![Page 79: COMMON MISTAKES ON THE AP MICRO EXAM · Consumer and Producer Surplus √ The value in excess of the purchase price √ The income the firm gets in excess of its marginal costs. D](https://reader035.vdocuments.us/reader035/viewer/2022071019/5fd2ef2ca53549383d5b680f/html5/thumbnails/79.jpg)
EXTERNALITIES
Negative
Positive
![Page 80: COMMON MISTAKES ON THE AP MICRO EXAM · Consumer and Producer Surplus √ The value in excess of the purchase price √ The income the firm gets in excess of its marginal costs. D](https://reader035.vdocuments.us/reader035/viewer/2022071019/5fd2ef2ca53549383d5b680f/html5/thumbnails/80.jpg)
COST-BENEFIT ANALYSISMarginal Cost = Marginal Benefit Rule
Spillover Costs
Overallocation
Spillover BenefitsUnderallocation
Externalities
![Page 81: COMMON MISTAKES ON THE AP MICRO EXAM · Consumer and Producer Surplus √ The value in excess of the purchase price √ The income the firm gets in excess of its marginal costs. D](https://reader035.vdocuments.us/reader035/viewer/2022071019/5fd2ef2ca53549383d5b680f/html5/thumbnails/81.jpg)
P
Q
SPILLOVER COSTS AND BENEFITSIllustrating a Negative Externality
D
0
Spillovercosts
St
S
Overallocation
Q0 Qe
![Page 82: COMMON MISTAKES ON THE AP MICRO EXAM · Consumer and Producer Surplus √ The value in excess of the purchase price √ The income the firm gets in excess of its marginal costs. D](https://reader035.vdocuments.us/reader035/viewer/2022071019/5fd2ef2ca53549383d5b680f/html5/thumbnails/82.jpg)
P
Q
SPILLOVER COSTS AND BENEFITSIllustrating a Positive Externality
0 Qe Q0
D
Dt
SpilloverBenefits
St
Underallocation
![Page 83: COMMON MISTAKES ON THE AP MICRO EXAM · Consumer and Producer Surplus √ The value in excess of the purchase price √ The income the firm gets in excess of its marginal costs. D](https://reader035.vdocuments.us/reader035/viewer/2022071019/5fd2ef2ca53549383d5b680f/html5/thumbnails/83.jpg)
Taxation Concepts
![Page 84: COMMON MISTAKES ON THE AP MICRO EXAM · Consumer and Producer Surplus √ The value in excess of the purchase price √ The income the firm gets in excess of its marginal costs. D](https://reader035.vdocuments.us/reader035/viewer/2022071019/5fd2ef2ca53549383d5b680f/html5/thumbnails/84.jpg)
APPORTIONING THETAX BURDEN
Benefits-Received Principle
Ability-to-Pay Principle
• Progressive Tax• Regressive Tax• Proportional Tax
![Page 85: COMMON MISTAKES ON THE AP MICRO EXAM · Consumer and Producer Surplus √ The value in excess of the purchase price √ The income the firm gets in excess of its marginal costs. D](https://reader035.vdocuments.us/reader035/viewer/2022071019/5fd2ef2ca53549383d5b680f/html5/thumbnails/85.jpg)
TAX APPLICATIONS:
• Personal Income TaxProgressive
• Sales TaxRegressive
• Corporate Income TaxProportional - Regressive
• Payroll TaxesRegressive
• Property TaxesRegressive
Identify whether progressive, regressive, or proportional
![Page 86: COMMON MISTAKES ON THE AP MICRO EXAM · Consumer and Producer Surplus √ The value in excess of the purchase price √ The income the firm gets in excess of its marginal costs. D](https://reader035.vdocuments.us/reader035/viewer/2022071019/5fd2ef2ca53549383d5b680f/html5/thumbnails/86.jpg)
Price Supports SurplusesSubsidies
![Page 87: COMMON MISTAKES ON THE AP MICRO EXAM · Consumer and Producer Surplus √ The value in excess of the purchase price √ The income the firm gets in excess of its marginal costs. D](https://reader035.vdocuments.us/reader035/viewer/2022071019/5fd2ef2ca53549383d5b680f/html5/thumbnails/87.jpg)
EFFECT OF PRICE SUPPORTS
Pe
D
S
QeQc Qs
SurplusPs
Surplus beingcreated by the
subsidies
Q
P
Price SupportLevel
![Page 88: COMMON MISTAKES ON THE AP MICRO EXAM · Consumer and Producer Surplus √ The value in excess of the purchase price √ The income the firm gets in excess of its marginal costs. D](https://reader035.vdocuments.us/reader035/viewer/2022071019/5fd2ef2ca53549383d5b680f/html5/thumbnails/88.jpg)
International Trade• Comparative Advantage
• Case for Free Trade
• Export Supply
• Import Demand
![Page 89: COMMON MISTAKES ON THE AP MICRO EXAM · Consumer and Producer Surplus √ The value in excess of the purchase price √ The income the firm gets in excess of its marginal costs. D](https://reader035.vdocuments.us/reader035/viewer/2022071019/5fd2ef2ca53549383d5b680f/html5/thumbnails/89.jpg)
Total output will be greatest whenEach good is produced by the nationthat has the lowest domesticopportunity cost for that good.
U.S has comparative advantage in wheat
Brazil has comparative advantage in coffee
Principle of Comparative AdvantagePRODUCTION POSSIBILITIES
![Page 90: COMMON MISTAKES ON THE AP MICRO EXAM · Consumer and Producer Surplus √ The value in excess of the purchase price √ The income the firm gets in excess of its marginal costs. D](https://reader035.vdocuments.us/reader035/viewer/2022071019/5fd2ef2ca53549383d5b680f/html5/thumbnails/90.jpg)
Terms of Trade
Gains From TradeImproved Options
Principle of Comparative AdvantagePRODUCTION POSSIBILITIES
Trading Possibilities LineGraphically…
![Page 91: COMMON MISTAKES ON THE AP MICRO EXAM · Consumer and Producer Surplus √ The value in excess of the purchase price √ The income the firm gets in excess of its marginal costs. D](https://reader035.vdocuments.us/reader035/viewer/2022071019/5fd2ef2ca53549383d5b680f/html5/thumbnails/91.jpg)
PRODUCTION POSSIBILITIES
A
B
Cof
fee
(tons
)
Cof
fee
(tons
)
45
40
35
30
25
20
15
10
5
0
30
25
20
15
10
5
05 10 15 20 25 30 5 10 15 20
Wheat (tons) Wheat (tons)
Curve For Each CountryUnited States Brazil
![Page 92: COMMON MISTAKES ON THE AP MICRO EXAM · Consumer and Producer Surplus √ The value in excess of the purchase price √ The income the firm gets in excess of its marginal costs. D](https://reader035.vdocuments.us/reader035/viewer/2022071019/5fd2ef2ca53549383d5b680f/html5/thumbnails/92.jpg)
TRADING POSSIBILITIES LINES
Cof
fee
(tons
)
Cof
fee
(tons
)
45
40
35
30
25
20
15
10
5
0
30
25
20
15
10
5
05 10 15 20 25 30 5 10 15 20
A
B
Tradingpossibilities line
Tradingpossibilities line
Wheat (tons) Wheat (tons)
The Gains from TradeUnited States Brazil
![Page 93: COMMON MISTAKES ON THE AP MICRO EXAM · Consumer and Producer Surplus √ The value in excess of the purchase price √ The income the firm gets in excess of its marginal costs. D](https://reader035.vdocuments.us/reader035/viewer/2022071019/5fd2ef2ca53549383d5b680f/html5/thumbnails/93.jpg)
TRADING POSSIBILITIES LINES
Cof
fee
(tons
)
Cof
fee
(tons
)
45
40
35
30
25
20
15
10
5
0
30
25
20
15
10
5
05 10 15 20 25 30 5 10 15 20
A
B
Tradingpossibilities line
Tradingpossibilities line
A’
B’
Wheat (tons) Wheat (tons)
The Gains from TradeUnited States Brazil
![Page 94: COMMON MISTAKES ON THE AP MICRO EXAM · Consumer and Producer Surplus √ The value in excess of the purchase price √ The income the firm gets in excess of its marginal costs. D](https://reader035.vdocuments.us/reader035/viewer/2022071019/5fd2ef2ca53549383d5b680f/html5/thumbnails/94.jpg)
TRADING POSSIBILITIES LINES
Cof
fee
(tons
)
Cof
fee
(tons
)
45
40
35
30
25
20
15
10
5
0
30
25
20
15
10
5
05 10 15 20 25 30 5 10 15 20
A
B
Tradingpossibilities line
Tradingpossibilities line
A’
B’
Wheat (tons) Wheat (tons)
The Gains from TradeUnited States Brazil
The Case ForFree Trade
![Page 95: COMMON MISTAKES ON THE AP MICRO EXAM · Consumer and Producer Surplus √ The value in excess of the purchase price √ The income the firm gets in excess of its marginal costs. D](https://reader035.vdocuments.us/reader035/viewer/2022071019/5fd2ef2ca53549383d5b680f/html5/thumbnails/95.jpg)
U.S. EXPORT SUPPLYAND IMPORT DEMAND
U.S. DomesticAluminum Market
U.S. Export SupplyAnd Import Demand
Dd
Sd
If the world priceexceeds the U.S.
price by 25 cents...
$1.50
1.25
1.00
.75
.50
.25Pric
e (p
er p
ound
; U.S
. dol
lars
)
10050 75 125 150Quantity of Aluminum
10050Pr
ice
(per
pou
nd; U
.S. d
olla
rs)
$1.50
1.25
1.00
.75
.50
.25
Quantity of Aluminum
![Page 96: COMMON MISTAKES ON THE AP MICRO EXAM · Consumer and Producer Surplus √ The value in excess of the purchase price √ The income the firm gets in excess of its marginal costs. D](https://reader035.vdocuments.us/reader035/viewer/2022071019/5fd2ef2ca53549383d5b680f/html5/thumbnails/96.jpg)
EXPORTS = 50
U.S. EXPORT SUPPLYAND IMPORT DEMAND
U.S. DomesticAluminum Market
U.S. Export SupplyAnd Import Demand
$1.50
1.25
1.00
.75
.50
.25
10050
DdPric
e (p
er p
ound
; U.S
. dol
lars
)
Pric
e (p
er p
ound
; U.S
. dol
lars
)
10050 75 125 150
SURPLUS = 50
$1.50
1.25
1.00
.75
.50
.25
If the world pricegoes further up...
Sd
Quantity of Aluminum Quantity of Aluminum
![Page 97: COMMON MISTAKES ON THE AP MICRO EXAM · Consumer and Producer Surplus √ The value in excess of the purchase price √ The income the firm gets in excess of its marginal costs. D](https://reader035.vdocuments.us/reader035/viewer/2022071019/5fd2ef2ca53549383d5b680f/html5/thumbnails/97.jpg)
EXPORTS = 50
EXPORTS = 100
U.S. EXPORT SUPPLYAND IMPORT DEMAND
U.S. DomesticAluminum Market
U.S. Export SupplyAnd Import Demand
$1.50
1.25
1.00
.75
.50
.25
10050
DdPric
e (p
er p
ound
; U.S
. dol
lars
)
Pric
e (p
er p
ound
; U.S
. dol
lars
)
10050 75 125 150
SURPLUS = 50
SURPLUS = 100 $1.50
1.25
1.00
.75
.50
.25
If world pricesfall below $1.00...
Sd
U.S.exportsupply
Quantity of Aluminum Quantity of Aluminum
![Page 98: COMMON MISTAKES ON THE AP MICRO EXAM · Consumer and Producer Surplus √ The value in excess of the purchase price √ The income the firm gets in excess of its marginal costs. D](https://reader035.vdocuments.us/reader035/viewer/2022071019/5fd2ef2ca53549383d5b680f/html5/thumbnails/98.jpg)
SHORTAGE = 50
U.S. EXPORT SUPPLYAND IMPORT DEMAND
U.S. DomesticAluminum Market
U.S. Export SupplyAnd Import Demand
$1.50
1.25
1.00
.75
.50
.25
10050
DdPric
e (p
er p
ound
; U.S
. dol
lars
)
Pric
e (p
er p
ound
; U.S
. dol
lars
)
10050 75 125 150
SURPLUS = 50
SURPLUS = 100 $1.50
1.25
1.00
.75
.50
.25
Sd
EXPORTS = 50
EXPORTS = 100
IMPORTS = 50
U.S.exportsupply
Quantity of Aluminum Quantity of Aluminum
![Page 99: COMMON MISTAKES ON THE AP MICRO EXAM · Consumer and Producer Surplus √ The value in excess of the purchase price √ The income the firm gets in excess of its marginal costs. D](https://reader035.vdocuments.us/reader035/viewer/2022071019/5fd2ef2ca53549383d5b680f/html5/thumbnails/99.jpg)
SHORTAGE = 50
SHORTAGE = 100
U.S. EXPORT SUPPLYAND IMPORT DEMAND
U.S. DomesticAluminum Market
U.S. Export SupplyAnd Import Demand
$1.50
1.25
1.00
.75
.50
.25
10050
DdPric
e (p
er p
ound
; U.S
. dol
lars
)
Pric
e (p
er p
ound
; U.S
. dol
lars
)
10050 75 125 150
SURPLUS = 50
SURPLUS = 100
U.S.exportsupply
EXPORTS = 50
EXPORTS = 100
IMPORTS = 50
IMPORTS = 100
U.S.import
demand
$1.50
1.25
1.00
.75
.50
.25
Sd
Quantity of Aluminum Quantity of Aluminum
![Page 100: COMMON MISTAKES ON THE AP MICRO EXAM · Consumer and Producer Surplus √ The value in excess of the purchase price √ The income the firm gets in excess of its marginal costs. D](https://reader035.vdocuments.us/reader035/viewer/2022071019/5fd2ef2ca53549383d5b680f/html5/thumbnails/100.jpg)
CANADIAN EXPORT SUPPLYAND IMPORT DEMANDCanada’s DomesticAluminum Market
Canada’s Export SupplyAnd Import Demand
DdSHORTAGE = 50
$1.50
1.25
1.00
.75
.50
.25
10050
Pric
e (p
er p
ound
; U.S
. dol
lars
)
Pric
e (p
er p
ound
; U.S
. dol
lars
)
10050 75 125 150
SURPLUS = 100
Canadianexportsupply
Canadianimport
demand
$1.50
1.25
1.00
.75
.50
.25
Sd
SURPLUS = 50
Quantity of Aluminum Quantity of Aluminum
![Page 101: COMMON MISTAKES ON THE AP MICRO EXAM · Consumer and Producer Surplus √ The value in excess of the purchase price √ The income the firm gets in excess of its marginal costs. D](https://reader035.vdocuments.us/reader035/viewer/2022071019/5fd2ef2ca53549383d5b680f/html5/thumbnails/101.jpg)
EQUILIBRIUM WORLD PRICE ANDQUANTITY OF EXPORTS & IMPORTS
Pric
e (p
er p
ound
; U.S
. dol
lars
)
U.S. exportsupply
U.S. importdemand
Quantity of Aluminum
Canadianexportsupply
Canadian importdemand
10050
$1.50
1.25
1.00
.75
.50
.25
25
.88 Equilibrium