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AP Microeconomics Mr. Sadow Chapters 4-6 Homework Page 1 of 2

For the microeconomic questions, use the Chapters 4-6 presentation or our notes. For the macroeconomics/microeconomics questions from chapters 1-3 and 17, you can use the chapter or topic listed after each question or our notes. The topics are the individual presentations on our website. You can also use your AP Macro. study guide.

Pages 1-21 from the presentation / pages 1-3 from the notes

1. Create two examples using the cross-price elasticity formula and any numbers you want. Label each number.

2. If the cross-price elasticity of two goods is -.5, what are the two goods called?

3. If the cross-price elasticity of two goods is .5, what are the two goods called?

4. If the cross-price elasticity of two goods is 0, what are the two goods called?

5. Create two examples using the price elasticity of demand (PED) formula and any numbers you want. Label each number.

6. Create two examples using the price elasticity of supply (PES) formula and any numbers you want. Label each number.

7. Contrast elastic/relatively elastic demand (D) and inelastic/relatively inelastic demand.

8. If a good’s or service's price elasticity of demand (PED) or PES is > 1, what are the terms that describe it?

9. If a good’s or service's price elasticity of demand (PED) or PES is < 1, what are the terms that describe it?

10. If a good’s or service's price elasticity of demand (PED) or PES = 1, what is the term that describes it?

11. Draw a graph of a production possibilities curve/frontier showing increasing/not proportional opportunity costs (1 graph total). Use

any two variables/products you want. Show an increase in production of one of the variables/products. (chapter 1 or topic 1)

12. Draw a graph of a production possibilities curve/frontier showing constant/proportional opportunity costs (1 graph total). Use any

two variables/products you want. Label as point B an efficient point, point A as inefficient, and point C as impossible. (chap/topic 1)

13. Start working on your extra credit index cards now. It will make it easier to finish if you start early and do some every few days.

Pages 22-46 from the presentation / pages 3-7 from the notes

1. Graph perfectly elastic demand (D) then give an example of it (1 graph total).

2. Graph perfectly inelastic demand (D) then give an example of it (1 graph total).

3. If a good’s or service's price elasticity of demand (PED) or PES is infinity, what is the term that describes it?

4. If a good’s or service's price elasticity of demand (PED) or PES = 0, what is the term that describes it?

5. If a good’s/service's price elasticity of demand (PED) or PES is < 1, what will an increase in price (P) do to a firm’s revenue? Why?

6. If a good’s or service's price elasticity of demand (PED) or PES = 1, what will an increase in price (P) do to a firm’s revenue? Why?

7. If a good’s/service's price elasticity of demand (PED) or PES is > 1, what will an increase in price (P) do to a firm’s revenue? Why?

8. Create two examples using the income elasticity of demand (YED) formula and any numbers you choose. Label each number.

9. If the income elasticity of demand is negative, what are the two goods called? If it is positive?

10. Draw a table and, using any two products, two countries, and numbers you want, create a situation where both countries have an

absolute advantage in producing only one product. Also list which country has the comparative advantage in producing each product.

Show your calculations. (chapter 1 or topic 2)

11. Compare and contrast movement along vs. shifts of the demand curve. Draw two graphs, one showing a shift and one showing a

movement (2 graphs total). Clearly label everything, including which graph is which, the graphs, and the curves. (chap. 3 or topic 4)

12. On our website, use the “Chapters 4-6 vocabulary Quizlet” link to review the words we have studied so far this chapter.

13. Keep working on your extra credit index cards. The extra points always help!

Pages 47-76 from the presentation / pages 7-12 from the notes

1. Using the grapes and bananas chart, give an example of utility and marginal utility.

2. Why are utility and total utility the same thing?

3. What typically happens to demand (D) when someone's income positively changes? Negatively? Create an example of both using

any numbers you want.

4. Why does the marginal benefit (MB) decrease as more of an item is consumed?

5. Why might a consumer not buy an item if the price (P) is higher than the marginal benefit (MB)? Create an example using any

numbers you want.

6. How is the demand (D) curve for a market determined?

7. What is the price equals marginal benefit (P = MB) rule? Explain it.

8. Draw two graphs showing consumer surplus (CS) (2 graphs total). Label everything, including the consumer surplus.

9. Explain how to calculate total consumer surplus.

10. What are the other two names for nominal gross domestic product? What four components make it up? (chapter 17 or topic 9)

11. What are the other two names for real gross domestic product? How is it different from nominal GDP? (chapter 17 or topic 9)

12. Draw two graphs of markets in equilibrium (2 graphs total). Label the market equilibrium (Me) Me, the equilibrium price (Pe) Pe,

and the equilibrium quantity (Qe) Qe. On the first graph, show an increase in demand (D) due to a reason other than price. On the

second graph, show an increase in supply (S) due to a reason other than price. Label the new market equilibrium (Me) Me1, the new

equilibrium price (Pe) Pe1, and the equilibrium quantity (Qe) Qe1. Clearly label everything and include the two sets of dotted lines.

(chapter 3 or topic 4)

13. Graph a binding price ceiling (1 graph total). Label the old and new Qs and Qd. Give an example of one. (chapter 3 or topic 7)

14. On our website, use the “Essential Graphs & Formulas: Microeconomics” Quizlet link to review the most important graphs/formulas.

Pages 77-103 from the presentation / pages 12-16 from the notes Page 2 of 2

1. What is an example of a fixed factor? A variable factor?

2. Explain the six fundamentals of a perfectly competitive or pure market then draw a graph of one (the market and a firm; 2 graphs

total). Label everything, including ME/SO/APE/PMP, and MR/D/AR/P/MB.

3. How is a price-maker different than a price-taker?

4. How are profits, total revenue (TR), and total costs (TC) related?

5. What is another name for the marginal product of labor (MPL)?

6. Why do diminishing returns to labor occur?

7. What is an example of a fixed cost (FC)? A variable cost (VC)?

8. Why do profits often first increase then decrease as more is produced in a firm?

9. Using a graph, show why the supply (S)/marginal cost (MC) curve gets steeper as the marginal cost increases (1 graph total).

10. Graph a binding price floor (1 graph total). Label the old and new Qs and Qd. Give an example of one. (chapter 3 or topic 7)

11. Using any numbers you want, create an example of a situation where a bank “wins” because of inflation when lending money and

another where it “loses” because of inflation when lending money. Label the following: nominal interest rate, inflation rate, and

real interest rate. (chapter 17 or topic 14)

12. Draw two graphs showing an economy (not a market) in short-run equilibrium (2 graphs total). Label the equilibrium output Y1 and

the equilibrium price level PL1. On the second graph, graph the impact of an increase in inflation/price-levels. (chap. 17 or topic 15)

13. On our website, use the “Chapters 4-6 vocabulary Quizlet” link to review the words we have studied so far this chapter.

14. Keep working on your extra credit index cards. The extra points always help!

Pages 104-123 from the presentation / pages 17-20 from the notes

1. If fixed costs (FC) are $50 and variable costs (VC) are $50 for producing one item, what are the total costs (TC) for that item? If the

total costs of the second item are $120, what is the marginal cost (MC)?

2. If total revenue (TR) is $100 and total costs (TC) are $90, what is the profit?

3. Explain marginal revenue product of labor (MRP). What is another name for this? How does MRP differ from MPL?

4. Explain the price equals marginal cost (P = MC) rule?

5. Draw two graphs showing producer surplus (PS) (2 graphs total). Label everything, including the producer surplus.

6. How do you calculate total producer surplus? Create a table showing the total producer surplus for four items using any numbers.

7. Draw two graphs showing an economy in (equal to) long-run equilibrium: full-employment/full output/the natural rate of

unemployment (3-5%) (2 graphs total). Label the equilibrium price level PL1 and the full-employment output Yf. (chap. 17/topic 15)

8. Draw two graphs showing an economy in short-run equilibrium (2 graphs total). Label the market equilibrium (Me) Me1, the

equilibrium price (Pe) Pe1, and the equilibrium quantity (Qe) Qe1. On each graph, show the impact of an increase in workers’ wages

on the economy. Label the new market equilibrium (Me) Me2, the new equilibrium price (Pe) Pe2, and the equilibrium quantity (Qe)

Qe2. Clearly label everything, including the graphs and the curves, and include the two sets of dotted lines. (chap. 17 or topic 15)

9. Using our website, use the “Microeconomics essential graphs and formulas” Quizlet link to review the most important

graphs/formulas.

10. On our website, use the “Essential Graphs & Formulas: Microeconomics” Quizlet link to review the most important graphs/formulas.

11. Finish working on your extra credit index cards. The extra points always help!

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