Question 1
The graph shows a perfectly competitive industry, starting in long-run equilibrium at point a, after demand rises from D₁ to D₂. Which statement describes the move from point b to point c?
The AP Microeconomics graphs, with a free graph drill
Every unit draws on supply and demand, and the rest of the course adds cost curves, the firm beside its market, monopoly, factor markets and externalities. For each event, decide which curve shifts and which way, then read what happens on both axes. The drill below draws every graph and checks every answer in code.
Market for a good, event 1 of 14
Coffee is a normal good. Consumers' incomes rise.
| Supply and demand | Price against quantity |
|---|---|
| Cost curves | Cost per unit against quantity: MC, ATC, AVC |
| Labor market | Wage against quantity of labor |
| Externalities | MSB and MSC against MPB and MPC |
The graphs and their axes
- Supply and demand: price on the vertical axis, quantity on the horizontal; demand slopes down and supply slopes up. Consumer surplus sits under demand and above price; producer surplus above supply and below price.
- Cost curves: MC is U-shaped and cuts AVC and ATC at their lowest points; the gap between ATC and AVC is average fixed cost.
- Perfect competition: the market sets the price, and the firm's demand is horizontal at that price, equal to its marginal revenue.
- Monopoly: demand slopes down and marginal revenue lies below it; the firm produces where MR = MC and charges the price on demand.
- Factor markets: wage on the vertical axis, quantity of labor on the horizontal; a firm hires where marginal revenue product equals marginal resource cost.
- Externalities: a negative externality puts marginal social cost above marginal private cost; a positive one puts marginal social benefit above marginal private benefit.
Shift or move along?
- A change in the good's own price is a movement along its demand and supply curves. Anything else that changes buyers' or sellers' plans shifts a curve.
- Income, tastes, the prices of related goods, expectations and the number of buyers shift demand.
- Input prices, technology, taxes and subsidies, expectations and the number of sellers shift supply.
Try 2 questions
Question 2
The graph shows a monopoly's demand, marginal revenue and marginal cost curves. What is the deadweight loss from the monopoly's profit-maximizing output, in dollars?
Next step
College Board's AP Microeconomics course page, with the unit weights
Questions people ask
What graphs do you need to know for AP Microeconomics?
The production possibilities curve, supply and demand with surplus areas, price controls and taxes, cost curves, the perfectly competitive firm beside its market, monopoly, monopolistic competition, factor markets including monopsony, and externalities.
Where does a perfectly competitive firm produce?
Where its marginal cost equals the market price, which is also its marginal revenue. It shuts down in the short run if the price is below its minimum average variable cost.
Why is a monopoly's marginal revenue below its demand curve?
To sell one more unit it must lower the price on every unit it sells, so the extra revenue from that unit is less than its price.