Models in AP Economics adapted from Sally Meek adapted from Sally Meek

Production Possibility Frontier or Curve Increasing Cost

Production Possibility Frontier Good X Good Y Increasing opportunity costs

Production Possibility Frontier or Curve Constant Cost

Production Possibility Frontier Good X Good Y Constant opportunity costs

Using PPFs and comparative advantage Radios Wheat Country A Country B

Comparative Advantage Matrix

RadiosWheat Country A 312 Country B 24

Supply and Demand Model

P Q S D P1 Q1

Determinants of Demand and Supply

Non-price determinants Demand Demand Changes in: T aste and preferenceT aste and preference R elated Goods:R elated Goods: Δ in prices = Δ in demand for other goodsΔ in prices = Δ in demand for other goods complements or substitutescomplements or substitutes I ncomeI ncome B uyer numbersB uyer numbers E xpectationsE xpectations Supply Changes in: T echnologyT echnology R elated Goods:R elated Goods: Δ in prices = Δ inΔ in prices = Δ in supply of other goods complements orcomplements orsubstitutes I nput CostsI nput Costs C ompetitor numbersC ompetitor numbers E xpectationsE xpectations

Market Welfare CS=consumer surplus PS=producer surplus

Market Welfare CS=consumer surplus PS=producer surplus P P1 Q D S Q1 PS CS

Cost Curves

Cost structure for a firm Q MC ATC AVC P

Perfectly Competitive Firm

The Firm – Perfect competition $ Q MC ATC AVC MR=d MR=d1 MR=d2 Q profitQ loss P P1 P2

The Market and the PC Firm in the short run

PP Q Q ATC MC P MR=d Q Q ATC S D

The Market and the PC Firm in the long run

PP Q Q LRATC MC P1 D The Market and the PC Firm in the long run: no economic profits MR=d1 S1 Q1

LRATC

The Firm $ Q LRATC

Monopoly Firm

Monopoly P Q D MR MCP Q ATC

Monopolistic Competitive Firm Short Run

Monopolistic Competition short run P D MR MC P Q ATC

Monopolistic Competitive Firm Long Run

Monopolistic Competition long run P D MR MC P=ATC Q LRATC

Oligopoly and game theory Blue Mart Red Shop North South $900, $1,800 North South $5,000, $4,000 $1,500, $1,000 $3,000,$3,500 1 st entry in cell is Red Shop’s daily profits and 2 nd entry is Blue Mart’s

Oligopoly and game theory Blue Mart North South $900, $1,800 North South $5,000, $4,000 $1,500, $1,000 $3,000,$3,500 1 st entry in cell is Red Shop’s daily profits and 2 nd entry is Blue Mart’s Red Shop

Factor Market—Perfect Competition Market and Firm

Perfect Competition in the Factor Market W Q labor W S=MRC Q Q S labor D labor W MRP=d

Factor Market— Monopsony

Monopsony W Q labor MRC S MRP W1 q1

Externalities Negative Externality and Internalized Scenario

Externalities Qm=market quantity Qs =Socially optimal quantity P Q MPC MPB MSC Qm Qs dwl Negative production externality

Externalities Positive Externality and Internalized Scenario

Externalities Qm=market quantity Qs =Socially optimal quantity Q PMPC MPB MSB QmQs dwl Positive consumption externality