AP®︎ Microeconomics: Topic 3.2 Flashcards

Master key terms and definitions for Topic 3.2 of AP Microeconomics – Short-Run Production Costs to help you prep for quizzes and the AP exam.

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Term

Short Run and Long Run

Definition

Short run has at least one fixed input; long run has all inputs variable.

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Short Run and Long Run
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Short run has at least one fixed input; long run has all inputs variable.

PRD-1.A
Fixed Cost, Variable Cost, and Total Cost
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Fixed costs do not vary with output, variable costs do, and total cost equals both combined.

PRD-1.APRD-1.A.4
Average Fixed Cost, Average Variable Cost, and Average Total Cost
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AFC = FC/Q, AVC = VC/Q, and ATC = TC/Q = AVC + AFC.

PRD-1.A
Marginal Cost
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The additional cost of producing one more unit, calculated as change in total cost over change in output.

PRD-1.APRD-1.A.5
Total Fixed Cost Curve
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A horizontal line because fixed cost stays constant at every output level, including zero.

PRD-1.APRD-1.A.5
Total Variable Cost and Total Cost Curves
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Both rise with output, and total cost is total variable cost shifted upward by fixed cost.

PRD-1.APRD-1.A.5
Average Fixed Cost Curve
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It slopes downward continuously because the same fixed cost is spread over more units.

PRD-1.A
Average Variable Cost and Average Total Cost Curves
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Both are U-shaped and average total cost always lies above average variable cost by average fixed cost.

PRD-1.APRD-1.A.5
AFC Approaches Zero and ATC Approaches AVC
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As output rises, average fixed cost shrinks toward zero, so average total cost gets closer to average variable cost.

PRD-1.APRD-1.A.5
Cost Curve Shifts from Fixed Cost Changes
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Higher fixed costs shift AFC and ATC up, but do not change AVC or MC.

PRD-1.APRD-1.A.8
Cost Curve Shifts from Variable Cost Changes
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Higher variable costs shift AVC, ATC, and MC up, while AFC stays unchanged.

PRD-1.APRD-1.A.8
Cost Curve Shifts from Productivity Changes
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Higher productivity lowers per-unit and marginal costs, shifting relevant cost curves downward.

PRD-1.APRD-1.A.8
Accounting vs. Economic Measures
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Accounting measures use explicit costs only, while economic measures include implicit opportunity costs.

PRD-1.A
Why Marginal Cost Changes
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Specialization lowers early marginal cost, but diminishing marginal returns eventually make marginal cost rise.

PRD-1.APRD-1.A.6
Marginal Cost and Average Cost Relationship
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When marginal cost is below average it pulls it down, and it crosses averages at their minimums.

PRD-1.A