AP Microeconomics
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Teacher Resources
Our students will have both a college level text and access to the NCEE activity workbook for the entire semester. However, economics cannot best be understood as a collection of theories devoid of real world application. Students will therefore, be required to avail themselves of our library’s periodical offerings. Below is a list of supplemental news sources. Students will be required to hand in an article on a specific topic each week. In addition the instructor will regularly supplement course materials from these:
The Wall Street Journal
The New York Times
The Economist
Students will keep a copy of the primary text at home. They are required to keep current with chapter readings and outline each chapter as we progress through the material.
Karl E. Case & Ray C. Fair, Principles of Economics, 5th ed. New Jersey: Prentice-Hall, 1999.
John S. Morton & Rae Jean B. Goodman, Advanced Placement Economics, Macroeconomics: Student Activities 3rd ed. New York: National Council on Economics Education, 2003.
Course Outline
Unit 1: Basic Economic Concepts
I. The Methods of Economics (2 weeks)
A. Economics: the scientific study of choice; ways of economic thinking
B. Distinguish between the concepts of opportunity cost, marginal cost, and sunk costs
C. Distinguish between positive and normative economics
D. Present the concept of economic modeling, and ceteris paribus
E. Discuss the rudiments of constructing and interpreting graphs
F. Productions Possibility Graphs: explain why the PPF was a negative slope and why it depicts the concept of opportunity cost. Explain the Law of Increasing Costs. Identify ways in which economic growth can occur.
G. Specialization and Comparative Advantage, address the advantages of exchange, introduce the controversies that surround globalization and outsourcing
F. Identify and distinguish how economic systems differ in their solutions to the three basic economic questions.
Assignments and evaluation: Students will outline chapters 1&2 in Case and Fair. Students will present current affairs articles of real world examples of scarcity. Students will complete activities and from NCEE. Students will be given a quiz to demonstrate mastery of concepts.
II. Demand, Supply, and Price Determination (2 weeks)
A. Demand: Identify the law of demand.
1.Provide discussion on the Substitution Effect and the Income Effect. Generate demand schedules and graphs. Distinguish between a normal and an inferior good
2.. Differentiate between a shift in the demand curve and a movement along the
demand curve
3.. Identify the Determinates of Demand; distinguish between goods that are complements and goods that are supplements.
4. Illustrate graphically the various scenarios presented to the class
B. Supply: Identify the Law of Supply
1. Explain the directly proportional relationship in terms of market entry and
increased output among existing firms.
2. Identify the determinants of supply, distinguish between a shift in supply and a movement along an existing supply curve.
3. Illustrate graphically the various scenarios presented to the class.
C. Equilibrium Price and Quantity; the process by which the market uses the price-rationing mechanism to allocate and distribute resources.
1. Define an illustrate surpluses and shortages graphically
2. Interpret the effect of price floors and price ceilings on equilibrium price and quantity.
3. Introduce market failure, and list nonprime rationing policies designed to supplant the price-rationing mechanism
4. Introduce the concepts of externalities and public goods.
Assignments and evaluation: Students will outline chapters 3 and 4 in Case and Fair. Students will present current affairs articles on demand and supply related disequilibriums in the real world. Students will read supplemental article from NYT on subsidies in the corn market. Students will complete activities and . Students will have a unit test in first 4 weeks intended to demonstrate their ability to put the concepts together.
Unit 2: Consumers and Firms
I. Household behavior and consumer choice (1 week)
A. Household choice in Output Markets
1. The Determinants of Household Demand
2. The Budget Constraint
B. Rational Choice based on utility
1. Diminishing marginal utility/ the downward sloping demand curve
2. Allocating Income to maximize utility
3. The Utility maximizing rule
C. Income and Substitution Effects
D. Consumer Surplus
E. Household Choice in Input Markets
1. The Labor supply decision
2. The price of leisure
3. Savings vs. borrowing : present vs. future consumption
Assignments and evaluation: Students will outline chapters 6 in Case and Fair. Students will present current affairs articles concerning typical decisions about work vs. leisure. Students will complete activity 11 from NCEE. Students will be given a quiz to demonstrate mastery of concepts.
II. The Behavior of the profit maximizing firm (1 week)
A. The three basic decisions
1. How much output to supply?
2. How to produce that output?
3. How much of each input to demand?
B. Define Economic Profits
1. Normal rate of return
2. Opportunity cost of inputs
C. Short-run vs. Long-run decisions
D. Production functions, define and derive the graph for
1. Total Product
2. Marginal Product
3. Average Product
E. Capital vs. Labor inputs
Assignments and evaluation: Students will outline chapters 7 in Case and Fair. Students will present current affairs articles concerning production cost decisions made by real world firms.. Students will complete activities 26(entitled “Costs of the Individual Firm”) and 27 (entitled, “An introduction to Perfect Competition”) from NCEE. Students will be given a quiz to demonstrate mastery of concepts.
III. Short-run costs and Output decisions (1 week)
A. Costs in the Short-run/ define and derive the graph for each:
1. Fixed costs
2. Variable costs
3. Total costs
4. Marginal costs
B. Output Decisions; revenue, costs, and profit maximization
1. The relationship between total revenue and marginal revenue
C. Profit maximizing level of output
1. Plot industry and firm graphs
2. Explain why MR=MC is the golden rule
D. Students will translate cost charts to graphs and vis-versa to develop mastery
Assignments and evaluation: Students will outline chapters 8 in Case and Fair. Students will complete activity 28 from NCEE, entitled “Costs and Competitive Market Supply“. Students will be given a scenario that requires both an industry and firm graph, and asked to demonstrate the effect of various shifts in supply and demand.
IV. Output decisions in the long-run (2 week)
A. Review the concepts of economic profit and lose; normal rate of return
B. Students will graph the following conditions for a perfectly competitive firm:
1. Short-run profit
2. Short-run lose
3. Long-run equilibrium
4. Shut down conditions
C. Economies of Scale and Long-run Costs; students must be able to explain each with a graphic presentation and explain why firm would choose to operate on a particular point.
1. Increasing returns to scale
2. Constant returns to scale
3. Decreasing returns to scale
Unit 3: Resource Markets
I. Labor and Land Markets
A. Define and explain the implications of a derived demand
B. Diminishing marginal product of labor(MP)
1. Marginal revenue product of labor (MRP) vs. wage rate
C. substitution and Output effects of a change in factor price
D. Students will derive side by side labor market graphs (industry) and MRP graphs (firm). They will be asked to calculate units of labor at equilibrium given different wage rates.
E. Define and discuss the concept of pure rent
F. Shifts in factor demand curves
1. The quantity of complementary and Substitute inputs
2. The price of other inputs
3. Technological change
Assignments and evaluation: Students will outline chapters 10 in Case and Fair. Students will complete activity 44 from NCEE, entitled “How Many Workers Should be Hired?” Students will present articles on the condition of wages and employment in various industries. Students will demonstrate mastery with a quiz.
II. The Capital Market and Investment Decisions (1 week)
A. Review the definition of capital goods
1. Make distinctions between tangible and intangible
2. Introduce the concept of capital stock, investment, and depreciation
B. The market for Capital
1. Capital Income; interest and profits
2. Financial markets
3. Capital accumulation and allocation
4. Comparing costs and expected return
5. The relationship between interest rates and investment
Assignments and evaluation: Students will outline chapters 11 in Case and Fair. Students will complete activity 51from NCEE, entitled “Problems Dealing with Factor Markets” Students will present articles on the importance of infrastructure and an educated labor force in attracting new business to a particular area. Students will demonstrate mastery with a unit test on factor markets.
Unit 4: Market Imperfections
I. Monopoly (2 weeks)
A. Barriers to Entry
1. Government Franchises
2. Patents
3. Economies of Scale
4. Ownership of a scarce factor of production
B. Demand in Monopoly Markets
1. The marginal revenue and demand curve of the monopolist
2. The monopolist’s profit-maximizing Price and Output
3. The Absence of a supply curve in monopoly
4. Monopoly in the short and long runs.
C. Graphing monopolist conditions
1. Students will demonstrate marginal revenue, demand, marginal cost, average t total cost, and average variable cost for the monopolist.
2. Students will be required to do side by side comparisons of monopoly and
Perfect competition.
D. The Social Costs of Monopoly
1. Inefficiency and consumer loss
2. Rent-seeking behavior
3. Governmental solutions discussed
4. Monopsony, monopolies within input markets
E. The Natural Monopoly
1.define the conditions and graph
Assignments and evaluation: Students will outline chapters 13 in Case and Fair. Students will complete activity 32 (entitled “Marginal Revenue for an Imperfect Competitor”) and activity 35 ( entitled, “Let’s Play Monopoly”) from NCEE. Students will demonstrate mastery by solving a serious of problem sets.
II. Monopolistic Competition and Oligopoly ( 2 week)
A. Conditions of monopolistic competition
1. Product differentiation, advertising, and social welfare
2. The case for and against advertising
B. Price and Output Determination in Monopolistic Competition
1. Students will graph monopolistically competitive firms experiencing:
2. Short-run profits
3. Short-run losses
4. Shut down conditions
5. Long-run equilibrium
C. Arguments MC and efficient resource allocation.
D. Conditions of oligopoly
1. The collusion model
2. The Cournot model
3. The Kinked Demand Curve Model
4. The Price-Leadership Model
5. Game Theory
6. John Nash and theories of cooperation
E. Oligopolies and economic performance; arguments for and against.
Assignments and evaluation: Students will outline chapters 14 in Case and Fair. Students will complete activity 41, entitled “Game Theory” from NCEE. Students will present articles on the positive and negative aspects of large global corporations. Students will demonstrate mastery with a unit test.
Unit 5: The Role Government and Market Failure
I. Antitrust Policy and Regulation
A. The development of antitrust law
1. Historical background
2. Landmark antitrust legislation
3. Regulation of mergers
B. The Enforcement of antitrust laws
1. Antitrust divisions of FTC and Dept. of Justice
2. Consent Decrees
3. Criminal actions
4. Treble Damages
C. Exceptions from Antitrust Statutes
1. Lobbying
2. Labor unions
3. Sports Organizations
D. The case for and against Antitrust Enforcement (AT&T and Microsoft as examples)
E. Regulation vs. Deregulation; How to best make markets more competitive.
Assignments and evaluation: Students will outline chapters 15 in Case and Fair. Students will present articles on recently allowed mergers, and present on the criteria used by the government to reach a determination. Students will demonstrate mastery with a quiz.
II. Public Goods, Imperfect Information, and Social Choice
A. Externalities