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Social Studies
Grade 11-12
AP Microeconomics Graphs and Models Cheat Sheet
A printable reference covering supply and demand, elasticity, market structures, cost curves, welfare, externalities, and factor markets for grades 11-12.
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AP Microeconomics uses graphs and models to explain how consumers, firms, and markets make choices under scarcity. This cheat sheet helps students connect graph shapes, labels, formulas, and equilibrium rules that appear often on exams. It is especially useful for reviewing how changes in incentives shift curves and affect price, quantity, profit, and welfare.
Key Facts
- Market equilibrium occurs where quantity demanded equals quantity supplied, or Qd = Qs.
- Consumer surplus is the area below the demand curve and above the price, while producer surplus is the area above the supply curve and below the price.
- Price elasticity of demand is Ed = percent change in quantity demanded / percent change in price.
- Total revenue is TR = P x Q, and marginal revenue is MR = change in TR / change in Q.
- Profit is profit = TR - TC, and a firm maximizes profit where MR = MC if price or revenue covers the relevant cost.
- In perfect competition, the firm faces P = MR = demand, and long-run equilibrium occurs where P = MC = minimum ATC.
- A monopoly maximizes profit where MR = MC, then uses the demand curve to set price above marginal cost.
- A negative externality creates overproduction because the market supply curve reflects private cost, while the socially efficient quantity occurs where MSB = MSC.
Vocabulary
- Equilibrium
- The point where quantity demanded equals quantity supplied and there is no shortage or surplus.
- Elasticity
- A measure of how strongly quantity demanded or supplied responds to a change in price, income, or another factor.
- Marginal Cost
- The additional cost of producing one more unit of output.
- Marginal Revenue
- The additional revenue earned from selling one more unit of output.
- Deadweight Loss
- The loss of total surplus that occurs when a market produces less or more than the efficient quantity.
- Market Power
- A firm's ability to influence the price of its product rather than accepting the market price.
Common Mistakes to Avoid
- Confusing a movement along a curve with a shift of the curve is wrong because a price change causes movement, while a non-price determinant causes a shift.
- Setting price equal to marginal cost for a monopoly is wrong because monopolies choose quantity where MR = MC, then set price from the demand curve.
- Labeling deadweight loss as the entire surplus area is wrong because deadweight loss is only the lost gains from trades that do not occur or inefficient extra trades.
- Forgetting that average total cost determines profit is wrong because profit or loss depends on the gap between price and ATC at the profit-maximizing quantity.
- Using total values instead of marginal values for firm decisions is wrong because rational firms decide whether to produce one more unit by comparing MR and MC.
Practice Questions
- 1 A market has Qd = 100 - 2P and Qs = 20 + 2P. Find the equilibrium price and quantity.
- 2 A firm's total revenue rises from 260 when output rises from 10 to 13 units. Calculate marginal revenue over this range.
- 3 At the profit-maximizing output, a competitive firm's price is 14, and quantity is 50. Calculate the firm's economic profit.
- 4 Explain why a monopoly creates deadweight loss compared with a perfectly competitive market, using MR, MC, and the demand curve in your reasoning.