FORMULA SHEET
             Microeconomics
             Allocative Efficiency Condition
             P = MC, or more precisely, 
             Marginal Social Benefit (MSB) = Marginal Social Cost (MSC)
             Average Fixed Cost 
             AFC=TotalFixedCost(TFC)
                  Quantity of Output (Q)
             Average Product 
             AP= TotalProduct
                 Quantity of Input
             Average Profit
             AverageProfit=TotalProfit
                         Quantity
             Average Revenue
             AverageRevenue= TotalRevenue
                            Quantity
             Average Total Cost 
             ATC=   TotalCost(TC)
                  Quantity of Output (Q)
             Average Variable Cost 
             AVC=TotalVariableCost(TC)
                  Quantity of Output (Q)
                                                                  Formula Sheet  |  275
                                           Cross-Price Elasticity of Demand 
                                            PercentageChangeinQuantityDemandedofGood X
                                                    PercentageChangeinnPrice of Good Y
                                           Distributive Efficiency Condition
                                            MUF =MUC
                                             P       P
                                              F       C
                                           Elasticity of Supply
                                            PercentageChangeinQuantitySupplied
                                                   PercentageChangeinPrice
                                           (Use the point or arc formula as indicated below for the price elasticity of 
                                           demand, substituting the quantity supplied for the quantity demanded.)
                                           Factor of Production Hiring Rule: Hire Until
                                           MRP = MFC (in other books, MFC is sometimes called MRC)
                                           Gini Coefficient
                                                                              C
                                                     Line of Perfect Equality
                                             Cumulative % of IncomeLorenz Curve
                                            AB
                                                   Cumulative % of Families
                                                shadedarea
                                            area of triangle ABC
                                           Marginal Cost
                                                  Δ      Δ
                                                   TC     TVC
                                            MC==
                                                  ΔQ      ΔQ
              276  |  Cracking the AP Economics Macro & Micro Exams
                     Marginal Product of Labor 
                     MP =ΔTP
                        L   ΔL
                     Marginal Revenue 
                     MR=ΔTR
                            ΔQ
                     Marginal Revenue Product of Labor (MRP )
                                                              L
                     MRP = MP  × MR
                         L      L     output
                     Optimal Combination of Resources Condition
                     MP MP
                        LK
                      w = r
                     Optimal Consumption Rule
                     MUX=MUY
                      P       P
                        X      Y
                     Price Elasticity of Demand
                            Simple “Point” Formula
                                                  −
                                     ΔQ      QQ
                                         d    newold
                            %QΔ        Q        Qold
                                 d ==
                                      ΔP          −
                             %PΔ             PP
                                              newold
                                       P        P
                                                 old
                            More Precise “Arc” Formula 
                              QQ−
                                newold
                              QQ+
                             ⎛           ⎞
                                newold
                             ⎜     2     ⎟
                             ⎝           ⎠
                               PP+
                                newold
                                   +
                             ⎛ PP
                                        ⎞
                                newold
                             ⎜     2    ⎟
                             ⎝          ⎠  
                                                                                                         Formula Sheet  |  277
                                           Price for a Competitive Firm
                                           P = MR = AR
                                           Production Efficiency Condition 
                                            w MP         MP      MP
                                                    L        KL
                                            r = MP or      r   = w orp=minATC
                                                    K
                                           Profit 
                                           Profit = TR – TC
                                           Profit-Maximizing Output Level (if output should be produced at all), 
                                           rule for finding
                                           MR = MC
                                           Slope
                                            Rise
                                            Run
                                           Slope of the Total Product Curve 
                                            Rise =           ChangeinTotalProduct               = Marginal Product
                                            Run    Changein theNumberofUnitsof an Inpput
                                           Socially Optimal Level of Output
                                           MSB = MSC
                                           Total Costs
                                           Total Costs = Total Fixed Costs + Total Variable Costs, TC = TFC + TVC
              278  |  Cracking the AP Economics Macro & Micro Exams