AP Microeconomics Unit 3 — Production Cost and the Perfect Competition
Unit 3 focuses on how firms make production decisions based on costs and market structure. Students learn how costs behave in the short run, how marginal analysis guides output decisions, and how perfectly competitive firms determine profit, loss, and shutdown decisions. These concepts are heavily tested on the AP exam through cost tables, cost curves, and firm-level graphs.
This practice pack is designed to strengthen students’ ability to move between tables, equations, and graphs, and to apply cost concepts accurately in both multiple-choice and free-response formats. Emphasis is placed on shutdown conditions, profit calculations, and AP-style reasoning aligned with scoring expectations.
What’s included:
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1 Key Concept Sheet summarizing production and cost theory
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1 Definition Sheet with AP-accurate terminology
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Cost Practice (cost tables, ATC, AVC, MC relationships)
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Perfect Competition Shutdown Practice (AVC, profit/loss analysis)
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1 AP-style Multiple-Choice Set with answer key
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2 Free-Response Question Sets with scoring guidelines
This unit builds the analytical foundation needed for later topics such as imperfect competition and long-run market outcomes.
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