AP Microeconomics Study Guide — Complete Review by Unit

AP Microeconomics covers 6 units of firm-level economics — from supply and demand to market structures and factor markets. About 20% of students score a 5. Like AP Macro, the FRQ section (50% of score) requires drawing and labeling graphs correctly under timed conditions.

Unit 1: Basic Economic Concepts (6–10%)

Opportunity cost, comparative advantage, absolute advantage, PPC, and trade. Same as AP Macro Unit 1 — if you're taking both, master this once and it applies to both exams.

Unit 2: Supply and Demand (20–25%)

The foundational unit. Law of demand and supply, determinants that shift each curve, price controls (price ceilings and price floors), elasticity (PED, PES, income elasticity, cross-price elasticity), and consumer/producer surplus. The surplus triangle and deadweight loss from price controls are high-frequency FRQ topics.

Unit 3: Production, Cost, and the Perfect Competition Model (22–25%)

Short-run vs. long-run production, marginal product, average and marginal cost curves, and the profit-maximizing rule (MR = MC). In perfect competition, long-run equilibrium occurs at minimum average total cost (P = MR = MC = ATC). Know how to determine whether a firm should produce, shut down, or exit in both the short and long run.

Unit 4: Imperfect Competition (15–22%)

Monopoly: MR below demand, deadweight loss, price discrimination. Monopolistic competition: short-run profit, long-run zero profit (excess capacity). Oligopoly: interdependence, game theory (prisoner's dilemma), cartels. Know the difference in output and price between perfect competition and monopoly on a single graph — this is a near-guaranteed FRQ topic.

Unit 5: Factor Markets (10–18%)

Labor market supply and demand, marginal revenue product (MRP = MR × MP), wage determination in competitive vs. monopsonistic labor markets, and profit maximization in factor markets (hire until MRP = wage). Know how minimum wage creates a surplus (unemployment) in competitive labor markets.

Unit 6: Market Failure and the Role of Government (8–13%)

Externalities (positive and negative), Pigouvian taxes and subsidies, public goods (non-rival and non-excludable), tragedy of the commons, and information asymmetry. Government policy tools and their effects on welfare — deadweight loss from taxes appears frequently in FRQ part (c) questions.

FRQ Graph Strategy

The three most-tested AP Micro graphs are: (1) supply and demand with a price control or tax, showing CS/PS/DWL; (2) cost curves for a perfectly competitive firm showing profit/loss shading; (3) monopoly graph with MR, MC, ATC, showing the profit rectangle and deadweight loss. Practice each until you can draw and label them in under 90 seconds.

AP Micro Practice Questions · AP Micro Practice Test · How to Get a 5 on AP Micro

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