Teaching the Toughest Graphs David A. Anderson Centre College Chief Reader

Favorite Ways to Learn Economics Third Edition

Confidential and Proprietary – Not for Distribution Agenda

Tough Graphs from the 2012 AP Microeconomics Exam

Question: If Steverail raised its price above P m identified in part (a)(i), would total revenue increase, decrease, or not change? Explain.

Price Quantity Demand 0 Marginal Revenue Inelastic range Elastic Range

Price Quantity Demand 0 Marginal Revenue Inelastic range Elastic Range Price Quantity 0 Total Revenue

Price Quantity D 0 Elastic Q1Q1 Q2Q2 P1P1 P2P2 P TR Price Quantity D 0 Unit Elastic Q1Q1 Q2Q2 P1P1 P2P2 P TR same Price Quantity D 0 Inelastic Q1Q1 Q2Q2 P1P1 P2P2 P TR

Question: Suppose that Loriland imposes a per-unit tariff on sugar imports and the new domestic price including the tariff is $4. Calculate the total tariff revenue collected by the government. You must show your work.

2 4 World Price + Tariff Imports

Calculate the domestic consumer surplus for Loriland. You must show your work. Domestic Price 5 10

Consumer Surplus without the Tariff

Practice with Immediate Feedback Personal White Boards

Practice with Immediate Feedback Personal White Boards

See What Theyre Drawing Sidewalk Chalk

Posters

Other Toughies

Price ceilings and floors

Price Quantity Demand 0 Marginal Revenue PCPC Price Ceiling QCQC QMQM Supply

Price Quantity Demand 0 Marginal Revenue PCPC Price Ceiling QCQC QMQM Supply

The ECON CHEER o Supply o Demand o Equilibrium o Elastic o Inelastic o Substitutes o Complements o Production Possibilities o The Floors Up High o The Ceilings Down Low o And thats the way the Econ Cheer Goes!

Deadweight Loss

Quantity Price MSC MSB Socially Efficient Quantity Qs

Quantity Price Deadweight Loss of Overproduction Deadweight loss MSC MSB Qs Qp

Quantity Price Deadweight Loss of Overproduction Deadweight loss MSC DEMAND = MSB = MPC SUPPLY = MPC Marginal External Cost Qs Qp

Quantity Price The Arrow Points to the Socially Optimal Quantity SUPPLY = MSC DEMAND = MSB Qs Qp

Quantity Price Deadweight Loss of Underproduction Supply = MSC Demand = MSB Qs Qp Supply + Tax

Quantity Price Deadweight Loss of Underproduction MSC MSB Qs Qp

Wage Labor Supply Quantity of Labor A Firm Hiring in a Competitive Labor Market 10 Marginal Factor Cost

Wage Labor Supply Quantity of Labor A Firm Hiring in a Competitive Labor Market 10 Marginal Factor Cost 4 5 How much does it cost to hire another worker?

Wage Labor Supply Quantity of Labor A Firm Hiring in a Competitive Labor Market 10 Marginal Factor Cost 4 5 How much does it cost to hire another worker? $10

Wage Labor Supply Quantity of Labor A Firm Hiring in a Competitive Labor Market 10 Marginal Factor Cost 4 5 How much does it cost to hire another worker? $40

Wage Labor Supply Quantity of Labor A Firm Hiring in a Competitive Labor Market 10 Marginal Factor Cost 4 5 How much does it cost to hire another worker? $50 $50 - $40 = $10

Wage Labor Supply Quantity of Labor A Firm Hiring in a Monopsony Labor Market 10 Marginal Factor Cost 4 5 How much does it cost to hire another worker?. 11

Wage Labor Supply Quantity of Labor A Firm Hiring in a Monopsony Labor Market 10 Marginal Factor Cost 4 5 How much does it cost to hire another worker? Total factor cost went from $40 to $55, so $15. 11

Wage Labor Supply Quantity of Labor A Firm Hiring in a Monopsony Labor Market 10 Marginal Factor Cost 4 5 How much does it cost to hire another worker? 11 $11 for the 5 th worker and $4 in wage increases for the first four. $11 + $4 = $15

Wage Labor Supply Quantity of Labor A Firm Hiring in a Monpsony Labor Market Marginal Factor Cost 5 11 Marginal Factor Cost 15

Wage Supply of Labor Quantity of Labor Marginal Revenue Product Marginal Factor Cost Monopsony

Wage Supply of Labor Quantity of Labor Marginal Revenue Product Marginal Factor Cost Monopsony

Wage Supply of Labor Quantity of Labor Marginal Revenue Product Marginal Factor Cost

Teaching Each Other Half the class leaves the room You teach the remaining half a tough graph, such as the graph for Natural Monopoly, Monopsony, or Public Goods The students who left come back in The students who stayed teach the graph to the students who left Check comprehension with some questions for those who left the room Prizes?

Blind curves Pair up students Arrange so that one student in each pair is facing the chalkboard Place a divider between the students in each pair Draw a new graph on the board Have the students facing the board describe the curves to their partners without naming the curves. Examine the results Have the students switch places and repeat the activity

Graph jeapardy

$/unit Marginal Revenue Demand Marginal Cost P Q Quantity Long-Run Average Cost

Inflation Unemployment

Inflation Unemployment

Neat Applications

2-part Tariff Price Quantity Demand 0 P Ticket Price Q

2-part Tariff Price Quantity Demand 0 P Ticket Price Q Admission Fee Ticket Revenue

2-part Tariff Price Quantity Demand 0 P Ticket Price QCQC Admission Fee