AP Microeconomics Formula Sheet 2026 — Elasticity, Cost Curves & More
AP Micro does not provide a formula sheet on exam day. All equations must be memorized. The good news: the most critical formula — profit maximization at MR = MC — connects most other concepts on the exam once you understand it deeply.
Elasticity
Elasticity questions appear on virtually every AP Micro exam and require exact formula recall.
| Formula | Variables | Interpretation |
|---|---|---|
| PED = (% ΔQd) / (% ΔP) | PED = price elasticity of demand; always negative by law of demand | |PED| > 1: elastic; < 1: inelastic; = 1: unit elastic |
| Midpoint PED = [(Q₂−Q₁)/((Q₁+Q₂)/2)] ÷ [(P₂−P₁)/((P₁+P₂)/2)] | Use when given two price-quantity pairs | Most accurate elasticity estimate |
| PES = (% ΔQs) / (% ΔP) | Price elasticity of supply; always positive | >1: elastic supply; <1: inelastic |
| YED = (% ΔQd) / (% ΔIncome) | Income elasticity of demand | Positive = normal good; negative = inferior good |
| Cross-Price Elasticity = (% ΔQd of A) / (% ΔP of B) | Positive = substitutes; negative = complements |
Total Revenue Test: Elastic demand → P↑ means TR↓. Inelastic demand → P↑ means TR↑.
Revenue
| Formula | Variables | When to use |
|---|---|---|
| TR = P × Q | TR = total revenue | Always |
| MR = ΔTR / ΔQ | MR = marginal revenue | Additional revenue from one more unit |
| AR = TR / Q = P | AR = average revenue | For perfect competitors, AR = P = MR = D |
| MR = P (for perfect competition only) | Price taker: price doesn't fall when output rises | Competitive firm revenue |
| MR < P (for monopoly/monopolistic competition) | Must lower price to sell more, reducing revenue on all units | Imperfect competition |
Costs
| Formula | Variables | When to use |
|---|---|---|
| TC = TFC + TVC | TC = total cost, TFC = fixed cost, TVC = variable cost | Always: fixed + variable = total |
| MC = ΔTC / ΔQ = ΔTVC / ΔQ | MC = marginal cost; TFC doesn't change so it cancels | Most important cost formula |
| ATC = TC / Q | ATC = average total cost (= AC) | Cost per unit |
| AVC = TVC / Q | AVC = average variable cost | Variable cost per unit |
| AFC = TFC / Q | AFC = average fixed cost; always decreasing as Q rises | Fixed cost per unit |
| ATC = AVC + AFC | Identity | Always true |
| Profit = TR − TC = (P − ATC) × Q | Economic profit (can be negative) |
MC intersects ATC and AVC at their minimum points. This is tested graphically on almost every AP Micro exam.
Profit Maximization
| Condition | Meaning | What to do |
|---|---|---|
| MR = MC | Profit-maximizing output rule — applies to ALL market structures | Find Q where MR = MC; read price from demand curve |
| P > ATC | Economic profit (firm earns above-normal returns) | Entry attracted in long run (perfect competition) |
| AVC ≤ P < ATC | Operating at a loss but covering variable costs | Produce in short run; exit in long run |
| P < AVC | Shut down: can't cover variable costs | Produce Q = 0 in short run |
| P = ATC (long run) | Zero economic profit = normal profit | Long-run equilibrium for perfect and monopolistic competition |
Market Structures at a Glance
| Structure | MR vs. P | LR Profit | Key Formula Implications |
|---|---|---|---|
| Perfect competition | MR = P | Zero (P = ATC) | Produce where P = MC = MR |
| Monopoly | MR < P | Positive possible | MR = MC gives Q; read P from demand above |
| Monopolistic competition | MR < P | Zero LR (P = ATC) | Same as monopoly but entry drives profit to zero |
| Oligopoly | Varies | Varies | Game theory; no single formula |
Consumer & Producer Surplus
| Formula | Variables | When to use |
|---|---|---|
| Consumer Surplus = ½ × base × height (triangle) | Base = quantity at equilibrium; height = (max WTP − P) | Area under demand curve, above price line |
| Producer Surplus = ½ × base × height (triangle) | Height = (P − min supply price) | Area above supply curve, below price line |
| Total Surplus = CS + PS | Maximized at competitive equilibrium | Deadweight loss = reduction in total surplus from price distortions |
What's NOT a Formula (But Tested Quantitatively)
- Deadweight loss triangle: DWL = ½ × (P_monopoly − P_competitive) × (Q_competitive − Q_monopoly) — not always given, but logic of area is essential
- Lerner Index = (P − MC) / P — measures monopoly power; = 0 for perfect competition, higher for more monopoly power
- Minimum wage / price floors/ceilings: No formula, but you calculate surplus, shortage, or deadweight loss from graphs
How to Use These on the FRQ
- Write the formula, then substitute — "Profit = TR − TC = (P × Q) − (ATC × Q) = ($12 − $8) × 100 = $400"
- Always draw and label the graph — MR = MC at Q*, price read from demand curve at Q*, shade profit area (P − ATC) × Q*
- State whether profit is positive, negative, or zero — explicitly say "economic profit" vs. "normal profit"
Calculate your predicted AP Micro score
AP Microeconomics Score Calculator →AP Micro Score Cutoffs (2026)
| AP Score | Composite Range |
|---|---|
| 5 | 75–100 |
| 4 | 58–74 |
| 3 | 42–57 |
| 2 | 28–41 |
| 1 | 0–27 |
Frequently Asked Questions
Does AP Microeconomics provide a formula sheet?
No. AP Micro provides no formula reference sheet. All equations must be memorized. The most tested formulas are MR = MC (profit maximization), price elasticity of demand, and the cost curve relationships (MC, ATC, AVC).
What is the most important formula for AP Micro?
MR = MC. This profit-maximizing condition applies to every market structure and is the foundation of almost every AP Micro FRQ. From there, comparing P to ATC tells you profit/loss, and comparing P to AVC tells you whether to shut down.