2. Be careful to recognize when it is an INPUT problem

4.  If a monopolist increases price, and as a result, TR increases… what is Elasticity? Or with a twist…  If a firm increases output, and and as a result, TR increases… what is Elasticity?  Hint: always picture it on a graph, and remember the TR Test rules.

5.  If MR > 0 … Elastic … TR still increasing  If MR = 0 … Unit Elastic … TR is maximized  If MR < 0 … Inelastic … TR is decreasing

7.  Remember … If you spend your budget and (MU / P) A = (MU/P) B You have maximized your utility  Tip … if they are NOT equal, you want to buy more of the one that has a HIGHER MU/P

8. QuantityMarginal CostTotal Fixed Cost 0--20 1300 2200 3250 4300  Given a table such as this…  What is the AVC producing 2 units?  What is the ATC of producing 3 units?  What is AFC producing 4 units

9.  Example (all numbers refer to daily production of bikes by a typical firm:  TFC = $400  Average product of labor/day = 50 units  Q = 50 units  Labor costs (aka wage rate)= $80 per worker  What is Average Total Cost per bike

10.  MC decreases rapidly, then increases (nike)  ATC and AVC initially decrease, but then increase (but never touch)  AFC will always decrease, but never reach zero (TFC/Q)  MR will decrease (below D=AR=P)… unless it is Perf.Comp (where all these are horizontal)

11.  If a perfectly-competitive firm that wishes to maximize profits in the short run is producing a quantity of 1000 units at a point where: › price is $36, Average total cost is $45, Marginal cost is $42, and Average variable cost is $15… What, if anything, should they do with P and Q to maximize profit?

12.  Can you instantly spot…  Allocative Efficient  Socially Optimal  Productive Efficient  Fair Return Price  P=MC  P=ATCmin  P=ATC

16.  Your scores are scaled to the AP (good news)… because AP Tests are DIFFICULT (not so good news). That is why the average AP student only gets 55-60% correct. › Unit 1(4-8 questions) › Unit 2 (9-12 questions) › Unit 3 (5-8 questions) › Unit 4 (7-10 questions) › Unit 5 (15-18 questions) › Units 6&7 (12-15 questions)