AP Microeconomics 2025 Cheatsheet
Master the concepts with our interactive study tool
Unit 1: Basic Economic Concepts
• Labor (physical effort)
• Capital
• Entrepreneurship
Command Economy: Public firms with little incentive for efficiency/profit and government-set prices
Productive Efficiency: Point where costs are minimized (shown on PPC)
Absolute Advantage: Producing more of a good for same resources
Unit 2: Supply & Demand
Price Ceiling: Maximum price imposed on a market
Quotas: Limited amount allowed
Shortage: Qd > Qs
DWL: Deadweight loss when in disequilibrium
Unit 3: Production, Cost, & Perfect Competition Model
• Fixed costs: Constant regardless of changes
• Variable costs: Change with output level
Long-run: All inputs are variable
Productive Efficiency: ATC = MC
Maximized when MR = MC
• MR < ATC and MR < AVC: Shutdown short-run
• Low barriers to entry
• Allocatively efficient (P=MC) in short-run
• Both allocatively and productively efficient at long-run equilibrium
• Constant returns to scale
• Diseconomies of scale
Unit 4: Imperfect Competition
• Creates DWL (less output at higher price)
• MR < D (Marginal Revenue less than Demand)
• Eliminates DWL
• Achieves allocative efficiency (MR = D)
• Economic profit in short-run
• No economic profit in long-run
• Allocatively inefficient (P > MC)
• Strategic behavior important
Nash Equilibrium: No player can increase payoff by changing strategy
Unit 5: Factor Markets
• Demand comes from firms
• Supply comes from individual workers
• Workers hired ↑ → Marginal product (MRP) ↓
• MRC = Wage
• Profit maximization: MRP = MRC
• MC of labor has twice the slope of S curve
• Hires less people with lower wages than perfect competition
• Negotiate wages
• Increase demand for labor
• Decrease supply of labor
Unit 6: Market Failure & Role of Government
• Positive: Underallocation (solution: subsidy)
• Negative: Overallocation (solution: tax, price floor, quota)
• Marginal Social Benefit = Marginal Private Benefit + Marginal External Benefit
• Nonrival: One person's use doesn't reduce availability
• Common Resource: Rival and nonexcludable
• Externalities
• Public goods
• Imperfect information
Gini Coefficient: 0 (equal) to 1 (no equality)
• Taxes and subsidies
• Price controls
• Quotas
AP Microeconomics 2025 Cheat Sheet
The ultimate one‑page review: every essential graph, definition & formula you need for the May 2025 exam.
Demand & Supply: core graph
Label axes (Price P, Quantity Q), equilibrium Pe, Qe, shifts (right ↑, left ↓). Determinants mnemonic >> TRIBE & ROTTEN (2025 CED still uses).
- TRIBE – Tastes, Related goods, Income, # Buyers, Expectations (Demand).
- ROTTEN – Resource costs, Other goods, Technology, Taxes/Subsidies, Expectations, Number of sellers (Supply).
Elasticity cheat codes
Price Elasticity of Demand
|%ΔQd| / |%ΔP|
>1 elastic, <1 inelastic, =1 unit‑elastic.
Income Elasticity
%ΔQ / %ΔIncome → + normal, – inferior.
Surplus & welfare
Area of triangles above/below Pe. Deadweight loss triangles form after tax/subsidy or price controls.
Cost curves & profit max
- MC cuts ATC & AVC at their minimums.
- Profit‑max rule: produce where MR = MC.
- Shutdown if P < AVC.
Market structures snapshot
| Structure | # Firms | Entry Barriers | Long‑Run Profit |
|---|---|---|---|
| Perfect Competition | Many | None | 0 |
| Monopolistic Comp. | Many | Low | 0 |
| Oligopoly | Few | High | 𝑷>𝐴𝐓𝐶* |
| Monopoly | One | Very high | Positive |
Factor markets
MRC = wage, hire where MRP = MRC. For monopsony, MRC > wage curve; employment falls.
Policy tools
- Per‑unit tax shifts supply left; DWL forms; incidence depends on elasticity.
- Price ceiling below Pe → shortage; floor above Pe → surplus.
Exam‑day quick tips
- Label everything: axes, curves, equilibria and shaded areas.
- Use arrows to show shifts & direction of change.
- For FRQs, answer in 1–2 sentences/line items; no essays needed.
- Show math steps; units not required but earn clarity.
What is Microeconomics?
Microeconomics is the branch of economics that studies the behavior of individual economic units, such as consumers, households, firms, and industries. It analyzes how these individual units make decisions regarding the allocation of scarce resources and how their interactions determine prices and quantities in specific markets.
What is the difference between Microeconomics and Macroeconomics?
The primary difference lies in their scope:
- **Microeconomics** focuses on individual economic agents and specific markets (e.g., how the price of a specific car model is determined, why consumers buy less of a good when its price increases).
- **Macroeconomics** studies the economy as a whole (e.g., inflation, unemployment, GDP growth, national income, government policy).
Is Microeconomics hard? Is AP Microeconomics hard?
The difficulty of microeconomics, including AP Microeconomics, is subjective. It requires strong logical reasoning, analytical skills, and the ability to interpret graphs. While some find it challenging due to its conceptual nature and focus on problem-solving rather than rote memorization, others find it intuitive. It's often considered less mathematically intensive than higher-level sciences but involves significant graphical analysis.
What does Microeconomics focus on or study?
Microeconomics primarily focuses on:
- Consumer behavior and utility maximization.
- Firm behavior, production, and cost structures.
- Supply and demand in specific markets.
- Market structures (perfect competition, monopoly, oligopoly, monopolistic competition).
- Factor markets (labor, capital, land).
- Market failures (externalities, public goods, asymmetric information).
- Government intervention in markets (taxes, subsidies, price controls).
What is deadweight loss in Microeconomics?
Deadweight loss (DWL), also known as welfare loss, is a loss of economic efficiency that can occur when the equilibrium for a good or service is not achieved. It represents the reduction in total surplus (consumer surplus + producer surplus) that results from an inefficient allocation of resources, often caused by market distortions like taxes, price controls, or externalities.
What is elasticity in Microeconomics?
Elasticity in microeconomics measures the responsiveness of quantity demanded or quantity supplied to a change in one of its determinants (like price, income, or price of related goods). For example, price elasticity of demand measures how much the quantity demanded changes in response to a percentage change in price.
What are externalities in Microeconomics?
An externality is a cost or benefit imposed on a third party who is not directly involved in the production or consumption of a good or service.
- **Negative externalities** impose a cost (e.g., pollution from a factory).
- **Positive externalities** provide a benefit (e.g., vaccination reducing disease spread).
How do you calculate Total Revenue in Microeconomics?
Total Revenue (TR) is calculated by multiplying the price per unit (P) of a good or service by the quantity sold (Q). Formula: TR = P × Q.
How do you calculate profit in Microeconomics?
Profit is calculated as Total Revenue minus Total Cost. Formula: Profit = TR - TC. Firms aim to maximize profit by producing at the quantity where Marginal Revenue (MR) equals Marginal Cost (MC).
How to calculate Total Cost in Microeconomics?
Total Cost (TC) is the sum of Total Fixed Costs (TFC) and Total Variable Costs (TVC). Formula: TC = TFC + TVC.
How do you calculate opportunity cost in Microeconomics?
Opportunity cost is the value of the next best alternative that must be given up when a choice is made. It's not always a numerical calculation, but rather identifying the foregone benefit. For example, the opportunity cost of attending college might be the income you could have earned if you had worked instead.
How do you calculate tax revenue in Microeconomics?
Tax revenue for the government is calculated by multiplying the per-unit tax amount by the quantity sold after the tax is imposed. On a supply-demand graph, it's the area of a rectangle whose height is the tax per unit and width is the quantity traded after the tax.
What is a quota in Microeconomics?
A quota is a government-imposed limit on the quantity of a good or service that can be produced or imported. Quotas can lead to higher prices, reduced quantity, and deadweight loss in the market.
What is comparative advantage in Microeconomics?
Comparative advantage is the ability of an individual, firm, or country to produce a good or service at a lower opportunity cost than another producer. It's the basis for mutually beneficial trade.
What is demand in Microeconomics?
Demand in microeconomics refers to the quantity of a good or service that consumers are willing and able to purchase at various prices during a specific period, assuming all other factors remain constant (ceteris paribus).
How long is the AP Microeconomics Exam?
The AP Microeconomics exam is 2 hours and 10 minutes long. It consists of two sections: a multiple-choice section (60 questions in 70 minutes) and a free-response section (3 questions in 60 minutes).
What role does Microeconomics have in running a business?
Microeconomics is crucial for business decision-making. It helps businesses understand:
- **Pricing Strategies:** How to set prices to maximize revenue and profit based on consumer demand and competition.
- **Production Decisions:** How much to produce to minimize costs and maximize output.
- **Resource Allocation:** How to best allocate labor, capital, and other inputs.
- **Market Analysis:** Understanding consumer preferences, market structure, and competitive dynamics.
- **Forecasting:** Predicting how changes in market conditions might affect their business.
