Microeconomics Unit 3 COMPLETE Summary - Production & Perfect Competition

This video covers all of the key points of Unit 3 from the AP Microeconomics Course Exam Description (CED). Short-costs, Long-run cost, accounting vs economic profit, profit maximization, firm's supply curve, market long run supply.
For more help with unit three, there are content reviews, review games, and practice exercisesfor you at: www.reviewecon...
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Note: Topics are out of order because this is the oder in which they are covered in the ReviewEcon.com Total Review Booklet.
Note: AP©, Advanced Placement Program©, and College Board© are registered trademarks of the College Board, which was not involved in the production of, and does not endorse, this material.

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[@ReviewEcon]

Thank you very much for your kind words! 😄 Take care and good luck with this year's exams!

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[@ReviewEcon]

I'm glad my videos are helping! Good luck on your exams!

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[@ReviewEcon]

You're very welcome! Good luck on your exams!

[@aerospaceguy4639]

There might be a mistake at 16:47 I think you meant to say 'Minimum of ATC curve' instead of AVC, which is what you said. I'm not sure if Its a mistake on my part by I was thrown off sync by this. And it should be MinATC for the LR. Please check on this. Still a big fan of your life saving content regardless!

[@ReviewEcon]

Good catch! I just editted out the word variable to fix it and avoid that confusion. Thank you for letting me know about that error!

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You're welcome! Good luck with your exams!

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[@ReviewEcon]

Good luck on that test!

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[@ReviewEcon]

You're very welcome! I am so glad you've found it all helpful! I'll let the whole team know (just me 😉)!

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[@ReviewEcon]

You're very welcome! Thank you for watching!

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[@ReviewEcon]

I am so glad my videos helped! Good luck on your studies!

[@xecten9445]

Error at 7:03, TC/Q = ATC on line 3 is incorrectly recorded as 10.3. When Q = 3, TC = 34, therefore ATC should equal 34/3 = 11.33 instead of 10.3 Overall very helpful video series, I've used it last minute before my test and I couldn't be more gracious.

[@ReviewEcon]

Good call! I'll be fixing that for next year. I hope it didn't throw you off too much! Good luck tomorrow!

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[@rupinghosh5093]

2:21 Shouldn't the Marginal Product be 10 instead of 9? TP went from 36 to 46, so 10/1 = 10. Btw, you make this class so much easier to understand, rewatching them all before the exam. Thank you for making these.

[@ReviewEcon]

Yep! Clear typo in my table. Thank you! I'll make a new version soon.

[@ReviewEcon]

And good luck on your exams!

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Back here for another test, thanks for the video

[@ReviewEcon]

You're very welcome! Good luck on this test!

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[@ReviewEcon]

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[@sulagnapalit4951]

5:49 What is the difference between Marginal Cost and Marginal Cost of Labor?

[@ReviewEcon]

Good question! Marginal cost is the change in total cost (or total variable cost) as for producing one more unit (change in total cost divided by change in quantity). Marginal cost of labor , on the other hand, only focuses on the labor portion of the marginal cost. Marginal cost of labor is the wage divided by the marginal product of labor. On the AP Micro exam, these sorts of questions usually assume labor is the only variable cost. Then, marginal cost and marginal cost of labor will be equal.

[@sulagnapalit4951]

@@ReviewEcon Thank you for clearing that up for me!

[@ReviewEcon]

You're very welcome! Good luck with your exams!

[@JisooKawaiRuka]

hiiii great video! ❤I’m not very sure how to find the economic profit in the perfect competition graph😢

[@ReviewEcon]

Find the MR=MC quantity, then go up to the ATC (from that quantity) and make a point. Then go up to the demand curve (your MR=MC point). Connect those two points and draw lines to the y axis, creating a profit box. Good luck!

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[@ReviewEcon]

You're very welcome!

[@arjunmandloi2433]

Thanks for the video. I just have a quick question. What do the P (Y-axis) and Q(X-axis) represent on the graph?

[@ReviewEcon]

P is price and Q is quantity! We use these two labels on most microeconomics graphs.

[@arjunmandloi2433]

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[@ReviewEcon]

@@arjunmandloi2433 I'd say it really depends on your underlying knowledge. If you already took the class, you may want to start with the crash review video, to help you identify where you might struggle. Then I would focus on as much MC and FRQ practice as possible. FRQs are available from the CB and some MC practice is on ReviewEcon.com. Good luck!

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You're welcome! I'm glad my videos helped!!

[@zenon1177]

19:57 wait so firms only have to pay fixed costs when they shut down? btw thank you for the vids they are really helpful!

[@ReviewEcon]

Yes, if a firm shuts down (different from exciting the market) they lose the fixed costs. Fixed costs are by definition paid when zero units of output. I hope that helps!

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[@ReviewEcon]

You're very welcome! Good luck with your studies!

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[@ReviewEcon]

Awesome! You're welcome!

[@evelyn1666]

In which chapter did you talk about the two types of efficiency?

[@ReviewEcon]

Allocative efficiency is first introduced in 2.8. Both are discussed in 3.7 perfect competition. For a firm, productive efficiency means the firm is producing the quantity found at the minimum of the average total cost curve where ATC = MC. Allocative efficiency means that the firm is producing where marginal cost equals the price. Where D=MC. In unit 6, allocative efficiency is further defined as being where marginal social cost equals marginal social benefit. In a market with no externalities, the demand curve is the marginal social benefit curve and the supply curve is the marginal social cost curve. Allocative efficiency is also called socially optimal. I hope that helps! Good luck with your exams!

[@ReviewEcon]

In this video I discuss it at around 18:23. 😀

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I hear that macro exam was tough! Good luck with micro!

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@@ReviewEcon the multiple choice was brutal. The FRQs were a lot better. It's a bit late for me to buy your review packet, but I'll let other people who take macro/micro to check you out for next year.

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[@ReviewEcon]

Thank you! Good luck with your studies!

[@gerardtyson2274]

7:00 math error, should be 11.3 for ATC when Q = 3 and TC = 34. Not that it affects the lesson, anyway.

[@ReviewEcon]

Thanks for that catch! I will fix that and upload a new version in a few months.

[@7x6v69]

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[@ReviewEcon]

Thank you!

[@newfireidk6065]

Hello sir this is me again I'm a bit confused about profit maximization Like why is the profit in the end maximized when MR intersects with MC ? Wouldn't the marginal revenue you receive just cover the additional marginal cost ? Let's imagine a scenario where a product named 'A' is sold at the price of 2 dollars and the cost to produce it is also 2 dollars How is the profit maximized in this scenario then ?

[@ReviewEcon]

It's true there is often (with real numbers) no difference in profit between the MR=MC quantity and the previous unit. But the graph assumes infinite decimals of units. As long as MR>MC profit increases with that unit (or even fraction of a unit). You can be sure profit is maximized if you continue to produce until MR=MC. You could see questions with real numbers where MR never equals MC. Then, you just produce the largest quantity where MR>MC, but not the next unit where MC>MR. A Firm should keep as long as MR is > or = to MC. A Firm should never produce when MR

[@newfireidk6065]

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Thnx

[@ReviewEcon]

You're welcome!

[@newfireidk6065]

Afternoon Sir I am currently having troubles understanding variable and marginal cost Whyy isn't the variable cost in 5:09 proportional to the amount of unit produced ? Let's say that the ingredient cost for a Hotdog is 10 dollars That means that the cost for the amount of ingredients I need to make 4,5,6... hotdogs is 40,50,60... Also, is the law of diminishing returns the reason behind the fluctuations of the variable cost ? Too much employees -> Lack of productity / decrease in efficiency ---> more cost to produce one additional unit ?

[@ReviewEcon]

The marginal cost is the change in total cost for producing one more unit while variable cost (total variable cost) is the sum of the variable cost for each unit produced. The variable cost generally increases at an decreasing rate at low quantities then increases at an increasing rate. That's why marginal cost (the change in TC and change in TVC) decreases at low quantities (also due to specialization) and increases at high quantities (also due to diminishing marginal returns). I hope that helps a bit!

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[@ReviewEcon]

Thank you! If you have any questions, please ask them in the comments.

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14:57

[@ReviewEcon]

Perfect competition bookmark coming at you! Good luck on your exams!

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[@ReviewEcon]

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13:00

[@ReviewEcon]

Good luck on your exams!

[@Interventionroblox]

MR = MC JUMPSCARE 🤕

[@ReviewEcon]

😅

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dont you have videos for intermediate micro

[@ReviewEcon]

Unfortunately I do not have intermediate videos at this time. 😢 Intro micro and macro is the focus for now. Maybe some day!

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Let's hope for that! 😅 Good luck tomorrow!

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13:10 😂

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[@ReviewEcon]

Oh wow! I'm sorry it didn't go well. 😢 What was on your class exam that isn't covered in my videos?

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I'm gonna assume that's a good thing? 🤷‍♂️😉 Thanks for watching!

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