| Steven M. Reff Economics Lecturer University of Arizona (2007 - 2016) The 2015 University of Arizona Five-Star Faculty Award Steven Reff's Resume |
Unit 3: Production, Costs, and Perfect Competition
• Topic 3.1 The Production Function
• Topic 3.2 Short-Run Production Costs
• Topic 3.3 Long-Run Production Costs
• Topic 3.4 Types of Profit
• Topic 3.5 Profit Maximization
• Topic 3.6 Firms' SR Decisions to Produce and LR Decisions to Enter or Exit
• Topic 3.7 Perfect Competition
• Topic 3.1 The Production Function
• Topic 3.2 Short-Run Production Costs
• Topic 3.3 Long-Run Production Costs
• Topic 3.4 Types of Profit
• Topic 3.5 Profit Maximization
• Topic 3.6 Firms' SR Decisions to Produce and LR Decisions to Enter or Exit
• Topic 3.7 Perfect Competition
| (22% – 25% of the exam) |
| 11 - 13 class periods |
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| Unit 3 Production, Costs, and Perfect Competition |
| Week 7 |
Below are lessons for Unit 3: Topics 3.6 - 3.7 aligned to the AP® Microeconomics CED.
You will have textbook readings, short videos with 3 multiple choice questions, workbook
assignments, multiple choice questions, "free" response questions and much more.
These resources can be displayed on the instructor's projection system inside the classroom,
or the instructor can copy the links and give to the students as homework.
Link to the AP® Microeconomics CED (Course and Exam Description) to see in-depth
coverage on each of the topics listed below for Unit 3: Production, Costs, and Perfect Competition
You will have textbook readings, short videos with 3 multiple choice questions, workbook
assignments, multiple choice questions, "free" response questions and much more.
These resources can be displayed on the instructor's projection system inside the classroom,
or the instructor can copy the links and give to the students as homework.
Link to the AP® Microeconomics CED (Course and Exam Description) to see in-depth
coverage on each of the topics listed below for Unit 3: Production, Costs, and Perfect Competition
| Principles of Microeconomics |
| Days 1: Week 7 |
Topic 3.1 - 3.5 REVIEW
Topic 3.7 Perfect Competition
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| Remember, you still have all of the resources and assessments that The College Board® provides for you and your students. |
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| Days 2 and 3: Week 7 |
Topic 3.6 Firms' SR Decisions to Produce and LR Decisions to Enter or Exit
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| eWorkbook Activities Interactive: |
| eVideos -- Short Videos: |
| eTextbook Reading: |
| (3 min. or less, along with 3 multiple choice questions) |
| NEW Starter or Review Video: |
A) In the short run, firms decide to operate (i.e., produce positive output) or shut down
(i.e., produce zero output) by comparing total revenue to total variable cost or price to
average variable cost (AVC).
B) In the absence of barriers to entry or exit, in the long run (i.e., once factors that are fixed
in the short run become variable), firms enter a market in which there are profit-making
opportunities and exit a market when they anticipate economic losses.
NOTE: Topic 3.6 information above will be discussed THROUGHOUT Topic 3.7 Perfect Competition
information below.
(i.e., produce zero output) by comparing total revenue to total variable cost or price to
average variable cost (AVC).
B) In the absence of barriers to entry or exit, in the long run (i.e., once factors that are fixed
in the short run become variable), firms enter a market in which there are profit-making
opportunities and exit a market when they anticipate economic losses.
NOTE: Topic 3.6 information above will be discussed THROUGHOUT Topic 3.7 Perfect Competition
information below.
On many of the perfect competition side-by-side
graphs inside the links below, the market is
located on the right because the market is usually
RIGHT. The firm is located on the left because
have you ever seen the movie The Firm starring
Tom Cruise? What did he do? He LEFT the firm.
There are several graphs in the links below that
has the market on the left and the firm on the right
for those of you who graph it this way. Either way
is acceptable as long as you label the graphs
correctly.
graphs inside the links below, the market is
located on the right because the market is usually
RIGHT. The firm is located on the left because
have you ever seen the movie The Firm starring
Tom Cruise? What did he do? He LEFT the firm.
There are several graphs in the links below that
has the market on the left and the firm on the right
for those of you who graph it this way. Either way
is acceptable as long as you label the graphs
correctly.
| eVideos -- Short Videos: |
| eTextbook Reading: |
| (3 min. or less, along with 3 multiple choice questions) |
| eVideos -- Short Videos: |
| (3 min. or less, along with 3 multiple choice questions) |
| eTextbook Reading: |
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A) A perfectly competitive market is efficient. Firms in perfectly competitive markets face no
barriers to entry and have no market power.
B) In perfectly competitive markets, prices communicate to consumers and producers
the magnitude of others’ marginal costs of production and marginal benefits of
consumption and provide incentives to act on that information (i.e., price equals
marginal cost in an efficient market).
C) In perfectly competitive markets, firms can sell all their outputs at a constant price determined
by the market.
D) At a competitive market equilibrium, firms are price takers and select output to maximize
profit by producing the level of output where the marginal cost equals marginal revenue
(at the price).
E) At a competitive market equilibrium, the price of a product equals both the private
marginal benefit received by the last unit consumed and the private marginal
cost incurred to produce the last unit, thus achieving allocative efficiency.
F) In a short-run competitive equilibrium, price can either be above or below its long-run
competitive level resulting in profits or losses, motivating entry or exit of firms
and moving prices and quantities toward long-run equilibrium.
G) In a long-run perfectly competitive equilibrium, productive efficiency implies all operating
firms produce at efficient scale, price equals marginal cost and minimum average total cost,
and firms earn zero economic profit.
H) Firms may be in a constant cost, increasing cost, or decreasing cost industry. Long-run
prices depend on the portion of the long-run cost curves on which firms operate.
I) A perfectly competitive market in long-run equilibrium is allocatively and productively
efficient.
barriers to entry and have no market power.
B) In perfectly competitive markets, prices communicate to consumers and producers
the magnitude of others’ marginal costs of production and marginal benefits of
consumption and provide incentives to act on that information (i.e., price equals
marginal cost in an efficient market).
C) In perfectly competitive markets, firms can sell all their outputs at a constant price determined
by the market.
D) At a competitive market equilibrium, firms are price takers and select output to maximize
profit by producing the level of output where the marginal cost equals marginal revenue
(at the price).
E) At a competitive market equilibrium, the price of a product equals both the private
marginal benefit received by the last unit consumed and the private marginal
cost incurred to produce the last unit, thus achieving allocative efficiency.
F) In a short-run competitive equilibrium, price can either be above or below its long-run
competitive level resulting in profits or losses, motivating entry or exit of firms
and moving prices and quantities toward long-run equilibrium.
G) In a long-run perfectly competitive equilibrium, productive efficiency implies all operating
firms produce at efficient scale, price equals marginal cost and minimum average total cost,
and firms earn zero economic profit.
H) Firms may be in a constant cost, increasing cost, or decreasing cost industry. Long-run
prices depend on the portion of the long-run cost curves on which firms operate.
I) A perfectly competitive market in long-run equilibrium is allocatively and productively
efficient.
| Days 2 and 3: Week 7 |
Topic 3.7 Perfect Competition I
| Days 4 and 5: Week 7 |
Topic 3.7 Perfect Competition (MC is the Firm's Curve)
| Days 4 and 5: Week 7 |
Topic 3.7 Perfect Competition (Shut-Down Rule; Constant, Increasing, Decreasing Costs)
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| REVIEW: Perfect Competition |
| eWorkbook Activities Interactive: |
| eWorkbook Activities Interactive: |
| NEW Review Video: |
| Perfect Competition will continue into Week 8 with eWorkbook Activities, Reffonomics Baseball, Multiple Choice Questions, and FRQs. |
This is where you slow down and have students draw side-by-side graphs on a
sheet of paper and then you ask them questions -- Demand in the market
increases; demand in the market decreases, show profit or loss, show entry
and exit in a constant cost industry, and so on.
sheet of paper and then you ask them questions -- Demand in the market
increases; demand in the market decreases, show profit or loss, show entry
and exit in a constant cost industry, and so on.
Choose one of the two links below to use for calculating a bunch of profits
or losses at various prices.
or losses at various prices.