AP MICROECONOMICS EQUATIONS

Total Revenue (TR) = Price (P) x Quantity (Q)

Marginal Revenue (MR) = Change in Total Revenue / Change in Quantity

Average Revenue (AR) = Total Revenue / Quantity

Profit = Total Revenue - Total Cost

Economic Profit = TR - ( Explicit Cost+Implict Cost)

Accounting Profit= Total Revenue - Explicit Costs.

Marginal Cost (MC) = Change in Total Cost / Change in Quantity

Profit Maximizing = Marginal cost (MC) = Marginal Revenue (MR)

Allocative Efficiency = Price = Marginal Cost (MC) also known as Social optimal

Productive Efficiency = Marginal Cost (MC) = Minimum Average Total Cost (ATC)

Economic Efficiency = Total Welfare = Consumer Surplus + Producer Surplus

Supply and Demand Equilibrium = Quantity Supplied = Quantity Demanded

Marginal Revenue = Price = Demand at Equilibrium

Marginal Cost (MC) = Change in Total Cost / Change in Quantity

Marginal social cost (MSC) = Marginal Private Cost (MPC) + External Costs.

Consumer Surplus = Maximum Price Willing To Pay - Market Price

Producer Surplus = Market Price - Minimum Price Willing to Accept

marginal social benefit =Marginal Private Benefit (MPB) + Marginal External Benefits.

socially optimal quantity = Price(P) =Marginal Cost (MSC)

production externalities always have two supply curves

Consumption externalities always have two demand curves

Demand curves reflect benefit (MSB = MPB + MEB)

Supply curves reflect cost (MSC = MPC + MEC)

Positive Externalities always have underproduction, which means Q_{Socially Optimal} is more than the Q_{Free Market}. The solution to producing more is a per-unit subsidy.

Negative externalities always involve overproduction, which means Q_{Socialy Optimal} is less than Q_{Free Market}. the solution to producing more is a per-unit Tax.

Marginal revenue product(MRP) is the additional revenue generated from employing one more unit of a production factor. It is calculated as MRP = Marginal Physical Product (MPP) x Price of the output.