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Summary AP Microeconomics exam 2024 rated A
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AP Microeconomics exam 2024 rated A
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AP Microeconomics exam 2024 rated AEconomics - The study of how people, firms, and societies use their scarce
productive resources to best satisfy their unlimited material wants.
Resources - Factors of production, 4 categories: labor, physical capital,
land/natural resources, and entrepreneurial ability
Scarcity - The imbalance between limited productive resources and unlimited
human wants
Opportunity Cost - The most desirable alternative given up as the result of a
decision
Marginal Benefit (MB) - The additional benefit received from the consumption of
the next unit of a good or service
Marginal Cost (MC) - The additional cost incurred from the consumption of the
next unit of a good or a service
Marginal Analysis - The rational decision maker chooses an action if MB ≥ MC
,AP Microeconomics exam 2024 rated A
Law of Increasing Costs - The more of a good that is produced, the greater the
opportunity cost of producing the next unit of that good
Absolute Advantage - Exists if a producer can produce more of a good than all
other producers
Comparative Advantage - Exists if a producer can produce a good at lower
opportunity cost than all other producers
Specialization - When firms focus their resources on production of goods for
which they have comparative advantage
Productive Efficiency - Production of maximum output for a given level of
technology and resources. All points on the PPF are productively efficient
Allocative Efficiency - Production of the combination of goods and services that
provides the most net benefit to society. The optimal quantity of a good is
achieved when the MB = MC of the next unit and only occurs at one point on the
PPF
, AP Microeconomics exam 2024 rated A
Economic Growth - Occurs when an economy's production possibilities increase.
This can be a result of more resources, better resources, or improvements in
technology.
Market Economy (Capitalism) - An economic system based upon the fundamentals
of private property, freedom, self-interest, and prices
Law of Demand - Holding all else equal, when the price of a good rises, consumers
decrease their quantity demanded for that good
Absolute prices - The price of a good measured in units of currency
Relative Prices - The number of units of any other good Y that must be sacrificed
to acquire good X. Only relative prices matter
Substitution Effect - The change in quantity demanded resulting from a change in
the price of one good relative to other goods
Income Effect - The change in quantity demanded that results from a change in
the consumer's purchasing power (or real income)
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