AP Micro Important Formulas

MB=MC

optimal decision making

quantity demanded = quantity supplied

market equilibrium

quantity demanded - quantity supplied

shortage

quantity supplied - quantity demanded

surplus

consumer surplus + producer surplus

total welfare

% change in Q demanded of good x / % change in price of good x

price elasticity of demand

100 x (new value - old value) / old value

percentage change

price x quantity demanded

total revenue

% change Q demanded good x / % change income

income elasticity

% change Q demanded good x / % change in price of good y

cross-price elasticity

% change in Q supplied of good x / % change in price of good x

price elasticity of supply

change in total utility / change in quantity

marginal utility

MUx/Px = MUy/Py

utility maximizing rule

total revenue - explicit costs

accounting profit

total revenue - explicit costs - implicit costs

economic profit

total variable costs + total fixed costs

total cost

total cost / quantity

average total cost

change in total cost / change in quantity

marginal cost

total fixed costs / quantity

average fixed cost

total variable costs / quantity

average variable cost

MR = MC

profit-maximizing point

total revenue - total cost OR quantity x (price - average total cost)

profit (pi)

P = MR = AR

demand in perfectly competitive market

P = ATC

break even point in perfect competition

P < AVC

shutdown point in perfect competition

P = MR = MC = ATC

long-run equilibrium in perfect competition

MR = 0

revenue-maximizing quantity for monopoly (where TR is the highest)

price (demand) > MR = MC

monopoly long-run equilibrium

ATC = MC

quantity for productive efficiency

MC = MB = D = P

quantity for allocative efficiency

D = MB = MR

monopoly with perfect price discrimination

P = MC = MR

quantity produced by monopoly with perfect price discrimination

P > MC and P = ATC

monopolistic competition in the long run (normal profit / zero economic profit)

MP x P in perfect competition OR MP x MR in monopsony

marginal revenue product

change in total product of labor / change in labor

marginal product of labor

change in total resource cost / change in resource quantity or wage

marginal resource (factor) cost

MRP = MRC

for individual firm in a perfectly competitive labor market: profit-maximizing quantity of labor

MRP

for individual firm in a perfectly competitive labor market demand curve =

MRC

for individual firm in a perfectly competitive labor market supply, wage =

MPL / PL = MPk / Pk

least-cost combination of labor and capital (marginal product per dollar)

price of labor (same curve) = wage

in a monopsony, supply =

< supply

in a monopsony, MR

MFC = MRP > Wage

in a monopsony, hiring decision:

marginal social benefit = marginal social cost

socially optimal output

MSC > MPC; MSC > MSB (at equilibrium)

negative production externalities

MSC - MPC

marginal external cost

MSC < MPC; MSC < MSB (at equilibrium)

positive production externalities

MSB < MPB; MSB < MSC (at equilibrium)

negative consumption externalities

MSB > MPB; MSB > MSC (at equilibrium)

positive consumption externalities

change in taxes due / taxable income

marginal tax rate

total taxes due / total taxable income

average tax rate