AP Microeconomics Exam Instructions | Top 200 Vocabulary Words

The 200-word examination instruction list

AP Microeconomics asks you to explain how households, firms and markets respond to changes. When a question asks for a graph, identify the market, label the axes and show the change. When it asks why, name the incentive or constraint that changes behaviour.

Start with the list, or jump to exam requirements, worked examples, the Fencing Method or practice. The list includes command words and subject vocabulary that helps you read the task.

Essential instructions

No.	Instruction or term	Meaning or action
1	Identify	Name or pick out the item the question specifies.
2	State	Express the required point directly and clearly.
3	Describe	Report the relevant characteristics, events or pattern.
4	Explain	Connect the result to its cause, mechanism or reasoning.
5	Compare	Set the items side by side on the same relevant feature.
6	Interpret	Say what a statement, result or display means in context.
7	Justify	Give evidence for the claim and explain how that evidence supports, qualifies or defends it.
8	Evaluate	Weigh relevant evidence or criteria before reaching a judgment.
9	Determine	Work from the given information to establish an answer.
10	Calculate	Use numbers or other given information to work out a result.
11	Estimate	Find an approximate answer using the available clues.
12	Sketch	Show the required shape, relationships and labels.
13	Construct	Produce the specified representation using the information given.
14	Label	Attach the correct name to the indicated part.
15	Select	Choose only the number of options requested.
16	Check	Test the answer against the original instruction or condition.
17	Analyze	Break the information into relevant parts and explain how they relate.
18	Hybrid digital	Check which questions are displayed digitally and which answers go in a paper booklet.
19	Multiple-choice question	Select the answer that satisfies the full stem and any limiting words.
20	Free-response question	Produce your own answer and complete each labelled task.
21	Stimulus	Use the figure, extract or other material attached to the question.
22	Answer each subpart	Treat each lettered instruction as a separate job.

Subject terms and tasks

No.	Instruction or term	Meaning or action
23	Draw a correctly labelled graph	Name both axes and identify each relevant curve, equilibrium and change.
24	Identify the market	Name the product or factor traded and the buyers and sellers involved.
25	Shift a curve	Draw a new curve when a determinant other than the variable on the vertical axis changes.
26	Movement along a curve	Show a quantity response to a change in the variable plotted on the vertical axis.
27	Market equilibrium	Find the price and quantity where quantity demanded equals quantity supplied.
28	Demand schedule	Read quantities buyers would purchase at alternative prices under stated conditions.
29	Supply schedule	Read quantities sellers would offer at alternative prices under stated conditions.
30	Law of demand	A higher price generally lowers quantity demanded, holding other determinants fixed.
31	Law of supply	A higher price generally raises quantity supplied, holding other determinants fixed.
32	Normal good	Demand rises when income rises, other things equal.
33	Inferior good	Demand falls when income rises, other things equal.
34	Substitute goods	Demand for one rises when the price of the other rises, other things equal.
35	Complementary goods	Demand for one falls when the price of the other rises, other things equal.
36	Price elasticity of demand	Compare the percentage change in quantity demanded with the percentage change in price, typically using its absolute value for classification.
37	Price elasticity of supply	Divide percentage change in quantity supplied by percentage change in price.
38	Cross-price elasticity	Use the sign of the quantity response to another good’s price to identify substitutes or complements.
39	Income elasticity	Use the sign of the quantity response to income to distinguish normal from inferior goods.
40	Midpoint method	Use the average of starting and ending values as the base for each percentage change.
41	Unit elasticity	The absolute price elasticity equals one.
42	Total revenue test	Use the effect of a price change on revenue to infer elasticity under the stated demand conditions.
43	Price ceiling	A legal maximum price that is binding below the uncontrolled equilibrium.
44	Price floor	A legal minimum price that is binding above the uncontrolled equilibrium.
45	Shortage	At the given price, quantity demanded exceeds quantity supplied.
46	Surplus of a good	At the given price, quantity supplied exceeds quantity demanded.
47	Per-unit tax	A fixed charge per traded unit that can create a wedge between buyer and seller prices.
48	Tax incidence	Determine how the economic burden is divided between buyers and sellers.
49	Per-unit subsidy	A payment for each traded unit that changes effective prices and incentives.
50	Consumer surplus	Sum willingness to pay above the price paid for units purchased.
51	Producer surplus	Sum receipts above minimum willingness to accept for units sold.
52	Deadweight loss	The total surplus forgone relative to the efficient allocation.
53	Marginal benefit	The extra benefit from one more unit of an action or good.
54	Marginal cost	The extra cost from one more unit, under the stated comparison.
55	Opportunity cost	The value of the next-best alternative forgone.
56	Comparative advantage	Identify the producer with lower opportunity cost.
57	Absolute advantage	Identify the producer that uses fewer resources for the same output or produces more from the same resources.
58	Production possibilities curve	Show feasible combinations under fixed resources and technology.
59	Terms of trade	The rate at which goods are exchanged between trading parties.
60	Utility	The satisfaction a consumer receives from consumption.
61	Marginal utility	The additional satisfaction from consuming one more unit.
62	Diminishing marginal utility	Additional units tend to add less satisfaction, holding relevant conditions fixed.
63	Utility-maximising allocation	For an interior divisible-goods solution, compare marginal utility per dollar across goods.
64	Marginal product	The additional output from one more unit of a variable input.
65	Diminishing marginal returns	Additional units of a variable input eventually add less output when other inputs are fixed.
66	Fixed cost	A cost that does not vary with output in the short run.
67	Variable cost	A cost that varies with output.
68	Average total cost	Divide total cost by output.
69	Average variable cost	Divide variable cost by output.
70	Economic profit	Subtract explicit and implicit opportunity costs from revenue.
71	Normal profit	Zero economic profit after covering all opportunity costs.
72	Shutdown point	For a competitive firm, minimum average variable cost gives the short-run shutdown threshold.
73	Break-even point	At the relevant output, price equals average total cost and economic profit is zero.
74	Price taker	A firm or buyer takes the market price as given.
75	Perfect competition	Many buyers and sellers trade a homogeneous product, with free entry and exit in the standard model.
76	Marginal revenue	The change in total revenue from one additional unit sold.
77	Profit-maximising output	Compare marginal revenue and marginal cost, checking which output and boundary satisfy the model.
78	Monopoly	A single seller faces market demand and barriers prevent entry.
79	Natural monopoly	One firm can serve the relevant market at lower cost than multiple firms under the stated cost structure.
80	Price discrimination	A firm charges different prices for comparable units for reasons other than cost differences.
81	Monopolistic competition	Many firms sell differentiated products with relatively open entry.
82	Oligopoly	A small number of significant firms make strategically interdependent decisions.
83	Payoff matrix	Read outcomes for each combination of strategies, including the order in which payoffs appear.
84	Dominant strategy	A strategy that gives the best payoff regardless of the other player’s choice.
85	Nash equilibrium	No player can improve their payoff by changing strategy alone.
86	Marginal revenue product	Additional revenue attributable to one extra unit of an input.
87	Marginal factor cost	The increase in total factor cost from hiring one more unit.
88	Monopsony	A market with a single buyer, or a buyer with substantial purchasing power in the model.
89	Derived demand	Demand for a factor reflects demand for the output it helps produce.
90	Externality	An uncompensated effect on a party outside the transaction.
91	Marginal social cost	Private marginal cost plus external marginal cost.
92	Marginal social benefit	Private marginal benefit plus external marginal benefit.
93	Corrective tax	A charge intended to align private incentives with external costs.
94	Public good	A good that is nonexcludable and nonrival.
95	Common resource	A good that is difficult to exclude people from using but rival in use.
96	Free-rider problem	People can benefit without paying, weakening incentives to provide the good voluntarily.
97	Allocative efficiency	In the standard marginal model, the quantity where marginal social benefit equals marginal social cost.
98	Productive efficiency	Produce with minimum feasible cost or, in a production possibilities setting, operate on the frontier.
99	Lorenz curve	Plot cumulative shares of income against cumulative population shares ordered from lowest to highest income.
100	Gini coefficient	Summarise inequality from the gap between the Lorenz curve and the line of equality.

Economic reasoning, models and graphs

No.	Instruction or term	Meaning or action
101	Change in equilibrium	Compare the old and new intersections after showing which curve shifts.
102	Ceteris paribus	Hold other relevant factors fixed when isolating a relationship.
103	Economic model	Use its assumptions and variables to explain the outcome it predicts.
104	Endogenous variable	A quantity determined inside the model.
105	Exogenous change	A change taken as given from outside the model.
106	Price signal	A change in price that communicates scarcity and affects incentives.
107	Quantity demanded	The amount buyers would purchase at the stated price.
108	Quantity supplied	The amount sellers would offer at the stated price.
109	Market clearing	The price equates planned purchases and sales in the model.
110	Initial equilibrium	Label the intersection before the specified change.
111	New equilibrium	Label the intersection after the change.
112	Horizontal axis	Identify the quantity plotted along the bottom of the graph.
113	Vertical axis	Identify the price, rate or other variable plotted up the side.
114	Change in a determinant	Name the factor that moved a curve and state which curve responds.
115	Indeterminate effect	When changes push an outcome in opposite directions, the net direction depends on their relative sizes.
116	Direct effect	The first effect of a change within the mechanism specified.
117	Indirect effect	An effect that arises through an intermediate change.
118	Policy instrument	A tool used to influence the stated economic objective.
119	Policy objective	The result a policy is intended to achieve.
120	Distributional effect	Explain which people or groups gain, lose or bear a burden.
121	Percentage point	Subtract two percentage rates to measure their difference in points.
122	Relative percentage change	Divide the change by the appropriate baseline and multiply by 100%.
123	Per capita	Divide the total by the population represented.
124	Real value	Use a measure adjusted for changes in the price level.
125	Nominal value	Use the amount measured in current money.
126	Market incentive	A cost or reward that changes the payoff from an economic choice.
127	Scarcity	Limited resources require choices among competing uses.
128	Trade-off	Identify the gain from a choice and the competing benefit sacrificed.
129	Marginal analysis	Compare the benefits and costs of the next increment.
130	Short run	Use the period in which the model treats some quantities or costs as fixed.
131	Long run	Use the period in which the model permits the specified adjustments.
132	Binding constraint	A restriction that changes the feasible choice or market outcome.
133	Nonbinding constraint	A restriction that leaves the model’s outcome unchanged.
134	Comparative statics	Compare equilibria before and after a specified change.
135	Net benefit	Subtract relevant costs from relevant benefits.
136	Draw an arrow	Use an arrow to show the direction of a shift or movement when it makes the change clear.
137	Equilibrium condition	State the equality or adjustment rule defining equilibrium in the chosen model.
138	Label the units	Write units that distinguish prices, rates, amounts and percentages.
139	Find the difference	Subtract on the same basis and retain the unit.
140	Infer the direction	Use the model or evidence to say whether the variable rises, falls or remains unchanged.
141	Read the axes	Identify the quantities, units and intervals on a graph before using a value.
142	Gradient from a graph	Calculate change in the vertical quantity per change in the horizontal quantity.
143	Calculate a rate	Divide the relevant change or quantity by the appropriate time or other denominator.
144	Calculate the percentage change	Divide the change by the starting value and multiply by 100.
145	Unit rate	Calculate the amount corresponding to one unit of the other quantity.
146	Initial value	The value at the stated starting point.
147	Final value	The value at the stated end point.
148	Ratio	Compare two quantities by division in the order specified.
149	Relative change	Divide the difference by the initial value when that baseline is meaningful.
150	Direction of change	State whether the quantity increases, decreases or stays unchanged.
151	Magnitude	The size of a quantity, considered separately from direction.
152	Unit conversion	Use a conversion factor to change the units while keeping the quantity the same.
153	Representative sample	Check whether the selected cases reflect the population of interest.
154	Entry and exit	Trace how economic profits or losses change the number of firms in a market with open entry.
155	Wage determination	Find the wage implied by labour demand and supply or by the hiring model specified.
156	Subsidy expenditure	Multiply the subsidy per unit by the post-subsidy quantity.
157	Price markup	Subtract marginal cost from the price at the output of interest.
158	Estimate from the graph	Use the plotted trend to obtain a sensible approximate value.
159	Interpret the slope	Give the predicted change in response per one unit increase in the explanatory variable.
160	Interpret the intercept	Explain the predicted response at zero if zero makes sense in context.
161	Line of best fit	Draw a line representing the overall pattern of plotted data.
162	Scatterplot	Describe form, direction, strength and unusual points when relevant.
163	Unit tax revenue	Multiply the tax per unit by the quantity actually traded after the tax.
164	Extrapolation	Recognise when the requested prediction is outside the observed input range.
165	Difference versus association	Distinguish a numerical group contrast from an inference about the relationship.
166	Use the scale of the display	Check axis intervals and group labels before comparing.
167	Compare two proportions	Use the correct denominators and report the direction of the contrast.
168	Percentage within a group	Use only the stated group as the denominator.
169	Choose an appropriate display	Match the display to the variable type and comparison.
170	Exact value	Leave the answer in a form that preserves its full value.
171	Give units	Attach the required measurement unit to the final result.
172	Find the exact value	Retain radicals, fractions, logarithms or π in exact form where appropriate.
173	Set up an equation	Translate the given conditions into a mathematical relationship.
174	Check the solution	Substitute the result into the original equation to verify it.
175	In terms of	Use the specified quantity or symbol in the final expression.
176	Solve	Find the values that satisfy the equation or inequality.
177	Substitute	Replace a variable with the given value or expression.
178	Decimal places	Give the requested number of digits to the right of the decimal point.
179	Significant figures	Give the requested number of meaningful digits.
180	Round	Adjust a number to the requested precision using the next digit.
181	Plot	Place the supplied points on the correct axes and scale.
182	Range of values	Find all possible outputs under the stated restrictions.
183	Rate of change	Find the change in one quantity per unit change in another.
184	Interpolate	Estimate within the range covered by the data.
185	Extrapolate	Estimate outside the observed range using an assumed pattern.
186	Residual	Find the observed value minus the model’s predicted value.
187	Baseline scenario	Use the stated reference case against which an intervention is compared.
188	Economies of scale	Average cost per unit can decline as production increases.
189	Gross domestic product per capita	Divide domestic production value by population for the period.
190	Market demand from individual demand	Add the quantities each buyer demands at the same price.
191	Sample size	Check how many observations or individuals contribute to the result.

Evidence and other exam wording

No.	Instruction or term	Meaning or action
192	Contrast	Show how the items differ on a shared point of comparison.
193	Infer	Use clues to reach a conclusion the material implies.
194	Predict	Use available evidence to say what is likely to happen.
195	Suggest	Offer a plausible answer suited to the information given.
196	Assess	Judge the extent, value or strength of something using evidence.
197	Discuss	Develop a structured response that considers the relevant issues.
198	Distinguish	Give the feature that lets the reader tell two things apart.
199	Support	Supply evidence that helps establish the claim.
200	Illustrate	Make an idea clear with a relevant example or diagram.

What the AP Microeconomics exam requires

College Board lists the regular 2027 exam for May 4. The exam is hybrid digital. Answer multiple-choice questions and read free-response prompts in Bluebook, then handwrite the free responses in the supplied booklet.

Exam component	Format and weighting
I · Multiple choice	60 questions in 70 minutes, worth about two-thirds of the score.
II · Free response	3 questions in 60 minutes, including 10 minutes for reading, worth about one-third of the score. One long question counts for half the section and two short questions count for one-quarter each.
Calculator policy	A four-function calculator is allowed in both sections, including the built-in Desmos four-function calculator. Handheld calculators with storage capabilities, including scientific and graphing calculators, are excluded.

AP is a U.S.-based exam programme taken domestically and internationally. Confirm registration and local reporting time with your school or test centre. Use the official materials for your exact subject and exam year.

Read the task before choosing a method

A product market, a competitive firm and a labour market use different axes and curves. Read the prompt for the market or decision-maker before drawing. If a firm faces a market price, show how that price determines its marginal revenue before choosing its output.

Worked examples for common exam instructions

Draw a shift and state the effect

Prompt. Income rises for buyers of a normal good. Show the effect in a competitive market with upward-sloping supply.

Answer. Put price on the vertical axis and quantity on the horizontal. Shift demand to the right and hold supply fixed. Label the original and new intersections. Equilibrium price and quantity rise.

Calculate a tax wedge

Prompt. After a $4 per-unit tax, buyers pay $12 and sellers receive $8. Before tax, the market price was $10. How is the burden divided?

Answer. Buyers pay $2 more and sellers receive $2 less per unit. Their burdens sum to the $4 wedge.

Determine a competitive firm’s output

Prompt. The firm can sell at $20 per unit. Marginal costs of the first three units are $8, $15 and $22. Assume there are no later units with lower marginal cost. How many should it produce in the short run?

Answer. The first two units each add more revenue than cost. The third costs $22 and adds only $20 of revenue, so output is two units. These units also contribute positively toward any fixed cost.

Explain an external cost

Prompt. A factory’s emissions impose costs on neighbours. Show the relationship between marginal private cost and marginal social cost.

Answer. Marginal social cost lies above marginal private cost by the marginal external cost. If private and social benefits coincide, the unregulated competitive outcome can exceed the efficient quantity.

Use the Fencing Method to build an answer

Begin with one accurate answer. Add a detail that fixes it to the question, then add the rule or mechanism that justifies it. Transfer the same structure to a fresh case.

Start. Equilibrium quantity falls.

Add context. A binding price floor raises the price above the original equilibrium and reduces quantity demanded.

Add reasoning. At the higher price, sellers offer more units but buyers demand fewer. Without government purchases, the smaller quantity demanded limits trades in the standard model.

Transfer. Try a binding price ceiling and trace which side of the market limits trades.

Practise with the 200 terms

Choose one definition, one diagram task and one explanation. In each response underline the economic variable, then check the units and the mechanism. Try changing one assumption and work through the effect again.

Separate demand from quantity demanded

Try it. A good’s own price falls with other determinants unchanged. What moves?

Check. Quantity demanded rises along the existing demand curve. No new demand curve is required.

Frequently asked questions

What makes a graph count as evidence?

Label each axis, the curves that matter, and the initial or new equilibrium requested. Keep the graph and written explanation consistent. Use the specific question’s scoring guidelines to see which labels matter.

Official sources and next reading

College Board AP Microeconomics exam information and released questions · AP calculator policy · 2027 AP exam schedule

Top 200 Vocabulary Word List for AP Microeconomics | Must Know Words for Common Examination Instructions