Microeconomics Required Graphs and Terms

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1 Microeconomics Required Graphs and Terms Understanding and explaining the economic concepts required by the AP and IB exams rests on a solid knowledge of fundamental economic graphs and terms. In order to ensure adequate preparation, students will be required to create a graph library on 5 x 7 index cards and will be regularly tested on vocabulary terms. Vocabulary: Vocabulary tests will occur each week, on Thursday. The format will vary, but will primarily be matching or multiple choice, with some fill in the blank. Each test (except the first test) will consist of 36 terms 24 current terms, and 12 terms from previous lists. This will mean that the vocabulary being studied does not always precisely align with what is being taught that particular week, but will be consistent with the overall unit. Graphs: On one side of a 5 x 7 index card, students will write the title and, if necessary, a short onesentence summary of the graph s purpose. On the other side, students will create and properly label each listed graph. Because of the importance of these graphs, any error may result in a deduction of up to 50% of the possible points awarded for that graph. This includes misspelled words, mis- or un-labelled axes, and any other minor mistakes. As there are 105 graphs in the Microeconomics unit alone, students are required to turn in ten per week, on Monday. Unit 1 Graphs: 1. Create and correctly label a generic PPC illustrating capital goods and consumer goods with the following points: feasible but not efficient, feasible and efficient, not feasible (pp. 17) 2. Create and correctly label a generic PPC illustrating increasing opportunity cost between Good X and Good Y (pp. 19) 3. Create and correctly label a generic PPC illustrating capital goods and consumer goods with economic growth (pp. 20) 4. Create and correctly label a generic PPC illustrating capital goods and consumer goods with economic development (notes) 5. Create and correctly label a generic PPC illustrating an example of absolute advantage between two firms or countries. Show on one graph (notes) 6. Create and correctly label a generic PPC illustrating an example of comparative advantage and gains from trade between two firms or people using two graphs (pp. 26) 7. Create and correctly label a generic PPC illustrating an example of comparative advantage and gains from trade between two firms or people using one graph (pp. 26 and 29) 8. Create and correctly label a generic PPC illustrating an example of comparative advantage and international trade using two graphs (pp. 28) 9. Create and correctly label a generic PPC illustrating an example of comparative advantage and international trade using one graph (pp. 28 and 29) Unit 2 Graphs: 1. Create and correctly label a generic demand schedule and a generic that correlates to it (pp. 50) 2. Create and correctly label a generic demand illustrating an increase in demand (pp. 51) 3. Create and correctly label a generic demand illustrating a decrease in demand (notes) 4. A generic demand illustrating a movement along the (pp. 52) (do not include the shift) 5. Create and correctly label generic s illustrating two individual demand s and a market demand (pp. 55)

2 6. Create and correctly label a generic supply schedule and a generic that correlates to it (pp. 60) 7. Create and correctly label a generic supply illustrating an increase in supply (pp. 61) 8. Create and correctly label a generic supply illustrating a decrease in supply (notes) 9. Create and correctly label a generic supply illustrating a movement along the (pp. 62) (do not include the shift) 10. Create and correctly label generic s illustrating two individual supply s and a market supply (pp.64) 11. Create and correctly label a generic supply and demand graph illustrating equilibrium (pp. 67) 12. Create and correctly label a generic supply and demand graph illustrating a price point above equilibrium (pp. 68) 13. Create and correctly label a generic supply and demand graph illustrating a price point below equilibrium (pp. 69) 14. Create and correctly label a generic supply and demand graph illustrating an equilibrium change due to an increase in demand (pp. 72) 15. Create and correctly label a generic supply and demand graph illustrating an equilibrium change due to a decrease in demand (pp. 73) 16. Create and correctly label side-by-side generic supply and demand graphs illustrating possible outcomes with demand and supply shifts (pp. 74) 17. Create and correctly label a generic supply and demand graph illustrating the effects of a price ceiling (pp. 79) 18. Create and correctly label a generic supply and demand graph illustrating the effects of a price floor (pp. 83) 19. Create and correctly label a generic supply and demand graph illustrating the effect of a quota (pp. 90) 20. Create and correctly label a generic demand indicating the price elasticity of demand is equal to zero (pp. 467) 21. Create and correctly label a generic demand indicating the price elasticity of demand is equal to infinity (pp. 467) 22. Create and correctly label a generic demand indicating the price elasticity of demand is equal to one (pp. 468) 23. Create and correctly label a generic demand indicating the price elasticity of demand is less than one (pp. 468) 24. Create and correctly label a generic demand indicating the price elasticity of demand is greater than one (pp. 468) 25. Create and correctly label a generic demand illustrating the impact of elasticity on total revenue (pp. 469) 26. Create and correctly label a generic demand illustrating the price elasticity along the demand (pp. 471) 27. Create and correctly label a generic supply indicating the price elasticity of supply is equal to zero (pp. 478) 28. Create and correctly label a generic supply indicating the price elasticity of supply is equal to infinity (pp. 478) 29. Create and correctly label a generic supply indicating the price elasticity of supply is equal to one (notes) 30. Create and correctly label a generic supply indicating the price elasticity of supply is less than one (notes) 31. Create and correctly label a generic supply indicating the price elasticity of supply is greater than one (notes) 32. Create and correctly label a generic supply and demand graph illustrating consumer surplus (pp. 486), producer surplus (pp. 491) and total surplus (pp. 496) on one graph

3 33. Create and correctly label a generic supply and demand graph illustrating a price drop and the effect on consumer surplus (pp. 488) 34. Create and correctly label a generic supply and demand graph illustrating a price increase and the effect on producer surplus (pp. 492) 35. Create and correctly label a generic supply and demand graph illustrating an added excise tax on the producer (pp. 501) 36. Create and correctly label a generic supply and demand graph illustrating an added excise tax on the consumer (pp. 502) 37. Create and correctly label a generic supply and demand graph illustrating the tax incidence when the price elasticity of demand is low and the price elasticity of supply is high (pp. 502) 38. Create and correctly label a generic supply and demand graph illustrating the tax incidence when the price elasticity of demand is high and the price elasticity of supply is low (pp. 504) 39. Create and correctly label a generic supply and demand graph illustrating revenue from an excise tax (pp. 505) 40. Create and correctly label a generic supply and demand graph illustrating the reduction of consumer surplus and producer surplus (pp. 507) 41. Create and correctly label a generic supply and demand graph illustrating the deadweight loss of a tax (pp. 508) Unit 2, Concept B Graphs: 1. Create and correctly label side-by-side graphs illustrating an individual s total utility and marginal utility (pp. 512) 2. Create and correctly label a budget line graph between Good X and Good y 3. Create and correctly label side-by-side graphs illustrating the optimal consumption bundle 4. Create and correctly label generic graphs illustrating the marginal utility per dollar Unit 2 Concept C Graphs: 1. Create and correctly label a generic schedule illustrating marginal product of labor and graph illustrating the production function and total product (pp. 543) 2. Create and correctly label a generic graph illustrating a labor (pp ) 3. Create and correctly label side-by-side graphs illustrating the total product, marginal product, and the fixed input (pp. 545) 4. Create and correctly label a generic schedule illustrating costs for a firm and graph illustrating the total costs for the firm (pp. 549) 5. Create and correctly label a generic table of costs for a firm and side-by-side graphs illustrating the total cost and marginal cost s for a firm (pp. 551) 6. Create and correctly label a generic table of average costs for a firm and the graph illustrating the average total costs for the firm (pp. 553) 7. Create and correctly label a single generic graph illustrating MC, ATC, AVC, and AFC (pp. 554) 8. Create and correctly label a generic graph illustrating the relationship between the ATC and the MC s (pp. 555) 9. Create and correctly label a generic graph illustrating realistic cost s (pp. 556) [Why is this one more realistic?] 10. Create and correctly label a generic table of costs for a firm and a graph illustrating how the firm chooses the level of fixed costs for the firm (pp. 560) 11. Create and correctly label a generic graph illustrating the short-run and the long-run ATC s (pp. 561) Unit 2 Concept D Graphs:

4 1. Create and correctly label an organizational table illustrating the types of market structure (pp. 568) 2. Create and correctly label a generic graph illustrating a firm s profit-maximizing quantity of output (pp. 539) 3. Create and correctly label a generic graph illustrating the price-taking firm s profit maximizing quantity of output (pp. 586) 4. Create and correctly label a generic graph illustrating the costs and production in the short-run for a firm (pp. 587) 5. Create and correctly label side-by-side graphs illustrating the profitability of a firm and the market price (pp. 591) 6. Create and correctly label a generic graph illustrating the short-run individual supply (pp. 593) 7. Create and correctly label a generic graph illustrating the short-run market equilibrium (pp. 600) 8. Create and correctly label side-by-side graphs illustrating the long-run market equilibrium (pp. 601) 9. Create and correctly label side-by-side graphs illustrating the effect of an increase in demand in the short-run and the long-run (pp. 603) 10. Create and correctly label to compare and contrast a generic graph for the short-run and long-run industry supply s (pp. 604) 11. Create and correctly label to compare and contrast side-by-side generic graphs of the demand for a perfectly competitive producer and a monopolist (pp. 609) 12. Create and correctly label to compare and contrast side-by-side generic graphs of the monopolist s demand, TR, and MR s (pp. 611) 13. Create and correctly label a generic graph illustrating the monopolist s profit-maximizing output and price (pp. 612) 14. Create and correctly label a generic graph illustrating the monopolist s profit (pp. 614) 15. Create and correctly label side-by-side graphs illustrating the inefficiency a monopoly causes (pp. 618) 16. Create and correctly label to compare and contrast side-by-side generic graphs of an unregulated and a regulated natural monopoly (pp. 620) 17. Create and correctly label a generic graph illustrating price discrimination for two different consumers (pp. 625) 18. Create and correctly label to compare and contrast three generic graphs: price discrimination with two different prices, price discrimination with three different prices, and perfect price discrimination (pp. 628) 19. Create and correctly label a generic graph illustrating a payoff matrix (pp. 645) 20. Create and correctly label a generic graph illustrating The Prisoner s Dilemma (pp. 646) 21. Create and correctly label a generic graph illustrating how repeated interaction can support collusion (pp. 648) 22. Create and correctly label side-by-side generic graphs illustrating the short-run for a profitable and an unprofitable monopolistically competitive firm (pp. 660) 23. Create and correctly label side-by-side generic graphs illustrating the effects of entry and exit (pp. 662) 24. Create and correctly label a generic graph illustrating the long-run zero-profit equilibrium (pp. 663) 25. Create and correctly label to compare and contrast generic graphs illustrating the long-run equilibrium in perfect competition and monopolist competition (pp. 664)

5 Unit 3 Graphs: 1. Create and correctly label side-by-side generic graphs illustrating the production function for a firm (pp. 683) 2. Create and correctly label a generic graph illustrating the value of the marginal product (pp. 685) 3. Create and correctly label side-by-side generic graphs illustrating shifts of the value of the marginal product for a decrease and an increase (pp. 687) 4. Create and correctly label side-by-side generic graphs illustrating the equilibria in the land and capital markets (pp. 691) Unit 4 Graphs: 1. Create and correctly label a generic graph illustrating the socially optimal quantity of pollution (pp. 725) 2. Create and correctly label a generic graph illustrating why a market economy produces too much pollution (pp. 726) 3. Create and correctly label a generic graph illustrating the efficiency quantity of pollution (pp. 732) 4. Create and correctly label side-by-side generic graphs illustrating the environmental standards and emissions taxes (pp. 733) 5. Create and correctly label side-by-side generic graphs illustrating positive externalities and consumption (pp. 737) 6. Create and correctly label side-by-side generic graphs illustrating negative externalities and production (pp. 739) 7. Create and correctly label a table illustrating four types of goods (pp. 744) 8. Create and correctly label three generic graphs illustrating two marginal private benefit s and the marginal social benefit 9. Create and correctly label a generic graph illustrating the use of a common resource (pp. 750) 10. Create and correctly label a generic graph illustrating the price setting for a regulated monopoly (pp. 757) 11. Create and correctly label a generic graph illustrating the Lorenz Curve (notes) Unit 1 Terms: Economics Individual choice Economy Market economy Command economy Traditional economy Incentives Property rights Marginal analysis Resource Land Labor Capital Entrepreneurship Scarce/scarcity Opportunity cost Microeconomics Macroeconomics Economic aggregates Positive economics Normative economics Trade-off Production possibilities (PPC) Efficient Technology Trade Gains from trade Specialization Comparative advantage Absolute advantage

6 Unit 2 Terms: Competitive market Supply and demand model Demand schedule Quantity demanded Demand Law of demand Change in demand Movement along the demand Substitutes Complements Normal good Inferior good Individual demand Quantity supplied Supply schedule Supply Law of supply Change in supply Input Movement along the supply Individual supply Equilibrium Equilibrium price Market-clearing price Equilibrium quantity Surplus Unit 2 Concept B Terms: Utility Util Marginal utility Marginal utility Shortage Price controls Price ceiling Price floor Wasted resources Inefficient allocation to consumers Inefficiently low quality Black markets Minimum wage Inefficiently high quality Quantity control or quota Inefficient allocation of sales among sellers License Demand price Supply price Wedge Quota rent Deadweight loss Substitution effect Income effect Price elasticity of demand Midpoint method Perfectly inelastic demand Perfectly elastic demand Elastic demand Inelastic demand Principle of diminishing marginal utility Budget constraint Consumption possibilities Unit-elastic demand Total revenue Income elasticity of demand Cross-price elasticity of demand Price elasticity of supply Perfectly inelastic supply Perfectly elastic supply Willingness to pay Individual consumer surplus Total consumer surplus Consumer surplus Cost Individual producer surplus Total producer surplus Producer surplus Total surplus Progressive tax Regressive tax Proportional tax Excise tax Tax incidence Deadweight loss Administrative cost Lump-sum tax Budget line Optimal consumption bundle Marginal utility per dollar Optimal consumption rul Unit 2 Concept C Terms (AP only, EXCEPT those marked with *): Production function Diminishing returns to an Fixed input input Variable input Fixed cost* Long-run* Variable cost* Short-run* Total cost* Total product Total cost Marginal product Average total cost Average cost* U-shaped average total cost Average fixed cost* Average variable cost* Minimum-cost output Long-run average total cost Economies of scale*

7 Increasing returns to scale Diseconomies of scale decreasing Decreasing returns to scale Constant returns to scale Sunk cost* Cost-minimization rule Unit 2 Concept D Terms (AP only, EXCEPT those marked with *): Price-taking firm* Implicit cost of capital Price-taking consumer* Normal profit Perfectly competitive Principle of marginal analysis market* Marginal revenue* Perfectly competitive* Optimal output rule industry Marginal cost Market share Marginal revenue Standardized product Price-taking firm s optimal Commodity output rule Free entry and exit Break-even price Monopolist Shut-down price Monopoly* Short-run individual supply Barrier to entry Natural monopoly Industry supply Patent* Short-run industry supply Copyright* Oligopoly* Short-run market Oligopolist equilibrium* Imperfect competition* Long-run market Concentration ratios equilibrium* Herfindahl-Hirschman Index Long-run industry supply Monopolistic competition Explicit cost* Public ownership Implicit cost* Price regulation Accounting profit* Single-price monopolist Economic profit Price discrimination* Perfect price discrimination Interdependence Duopoly Duopolist Collusion* Cartel* Noncooperative behavior Game theory* Payoff Payoff matrix Prisoners dilemma* Dominant strategy* Nash equilibrium* Noncooperative equilibrium* Strategic behavior Tit for tat Tacit collusion Antitrust policy Price war* Product differentiation Price leadership Nonprice competition Zero-profit equilibrium Excess capacity Brand name Unit 3 Terms: Physical capital Human capital Derived demand Factor distribution of income Value of the marginal product Value of the marginal product Rental rate Marginal productivity theory of income distribution Time allocation Leisure Individual labor supply Marginal revenue product of labor Marginal factor cost of labor Monopsonist Monopsony Compensating differentials Equilibrium value of the marginal product Unions Efficiency-wage model

8 Unit 4 Terms: Marginal social cost of pollution Marginal social benefit of pollution Socially optimal quantity of pollution External cost External benefit Externalities Negative externalities Positive externalities Coase theorem Transaction costs Internalize the externalities Environmental standards Emissions taxes Pigouvian taxes Tradable emissions permits Marginal private benefit Marginal social benefit of a good Marginal external benefit Pigouvian subsidy Technology spillover Marginal private cost Marginal social cost of a good Marginal external cost Network externality Excludable Rival in consumption Private good Nonexcludable Nonrival in consumption Free-rider problem Public good Common resource Overuse Artificially scarce good Marginal cost pricing Average cost pricing Poverty threshold Poverty rate Mean household income Median household income Gini coefficient Means-tested In-kind benefits Negative income tax

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