Lesson plans · AP Micro Unit 3 · MICRO 3.1, MICRO 3.2, MICRO 3.3
Production and the Short-Run Cost Curves
Essential question: Why do the short-run cost curves bend the way they do, and how does the production function explain every one of them?
2 × 50-minute periods · MICRO 3.1, MICRO 3.2, MICRO 3.3 · prints clean with Cmd/Ctrl+P
Objectives
- Students will be able to calculate MC, AFC, AVC, and ATC from a total-cost table and verify that AFC + AVC = ATC.
- Students will be able to explain the mirror-image relationship between marginal product and marginal cost.
- Students will be able to draw a correctly labeled short-run cost graph in which MC crosses AVC and ATC at their minimum points, with AVC's minimum at a lower quantity than ATC's.
- Students will be able to distinguish short-run diminishing marginal returns from long-run economies and diseconomies of scale.
- Students will be able to locate the shutdown point (minimum AVC) and break-even point (minimum ATC) on the cost graph.
Materials (all free, no student accounts needed)
Warm-up (8 min)
- Project the module's bakery numbers: 1 baker makes 40 loaves, 2 make 100, 3 make 140, 4 make 155. Students write the marginal product of each baker on a half-sheet (60, 40, 15) and one sentence on why MP falls.
- Cold-call two students: which baker was the first to show diminishing marginal returns (the third), and what fixed input caused it (the three ovens)?
Direct instruction (32 min)
- Build a cost table live on the board: set TFC = $120, add a TVC column, then derive AFC, AVC, ATC, and MC column by column so students see MC = change in TC / change in Q and ATC = AFC + AVC.
- Teach the GPA analogy for the marginal-average rule: this semester's grade (MC) pulls your cumulative GPA (ATC) up or down, so MC must cross ATC at its lowest point.
- Draw the four-curve graph once, slowly, narrating that AVC's minimum sits to the left of ATC's because falling AFC keeps dragging ATC down after AVC has already turned up.
- State the MP-MC mirror rule explicitly: when MP rises MC falls, when MP falls MC rises. Point back to the warm-up numbers.
- Contrast short run and long run: introduce LRATC with its three regions (economies of scale, constant returns, diseconomies of scale) and stress that diminishing returns does NOT explain the long-run curve because in the long run every input is variable.
Guided practice (30 min)
- Project /sandbox/production-costs (titled Short-Run Cost Curves) on the board.
- Drag the vertical quantity line to a low output and cold-call: is MC above or below ATC here, and is ATC rising or falling? Repeat at a high output so students say aloud 'MC below the average pulls the average down.'
- Grab the grey dashed fixed-cost (AFC) handle and drag it up. Ask the class what happens to ATC (shifts up) and to MC (unchanged). This nails that a fixed cost never moves MC.
- Send a student to the board to drag the quantity line to where MC crosses AVC, then to where MC crosses ATC, and read aloud that the first sits at a lower quantity.
- Think-pair-share with the graph frozen: each pair writes why AVC bottoms out before ATC. Take one answer and correct it to the declining-AFC explanation.
Independent practice (25 min)
- Students work the set at /practice/production-costs, prioritizing the table-math items (the $80-wage marginal-cost problem and the TFC + TVC total-cost problem).
- Each student then sketches a labeled short-run cost graph from a given TFC and TVC table and marks the shutdown and break-even points.
Exit ticket
- Given TFC = $200 and TVC of $140 at Q = 3 and $200 at Q = 4, compute AFC, AVC, ATC at Q = 4 and the MC of the 4th unit.
- In one sentence, explain why MC crosses ATC at ATC's minimum.
- Sketch the four short-run cost curves with AVC's minimum correctly placed to the left of ATC's minimum.
- A firm doubles all inputs and output more than doubles. Is this economies of scale or diminishing returns? Name it and say why.
Homework
- Read the Economies and Diseconomies of Scale section of the module and write three sentences distinguishing economies of scale from diminishing marginal returns.
- Finish the remaining /practice/production-costs items and bring one you missed to discuss.
Differentiation
- Support: give struggling students a pre-filled TFC/TVC table so they practice only the AFC, AVC, ATC, and MC divisions before attempting a graph.
- Stretch: ask advanced students to compute the MC of the 5th worker from a marginal-product table (MC = wage / MP) and explain the MP-MC mirror in their own words.
- For visual learners, keep the sandbox projected during independent work so they can check the shape of their hand-drawn graph.
Misconceptions to head off
- Students think MC can cross ATC or AVC anywhere along the curve. Correction: MC passes through the minimum of each average, because below the average it pulls the average down and above it pulls it up.
- Students treat economies of scale and diminishing returns as the same thing. Correction: diminishing returns is short-run with one input fixed; scale economies are long-run with all inputs changing together.
- Students believe AFC eventually rises. Correction: AFC = TFC / Q falls continuously toward zero and never turns up.
- Students read diminishing marginal returns as falling output. Correction: MP is falling but still positive, so total product keeps rising; output only falls when MP goes negative.
Teacher FAQ
- How many periods does this really take?
- Two 50-minute periods. Day 1 covers the cost-table math and the MC-and-average relationship; Day 2 is the graph geometry and long-run scale. If your students are solid on the Topic 3.1 production function, you can compress to about a period and a half.
- What should students already know?
- The production function and diminishing marginal returns from Topic 3.1. If they have not read that section, spend the first 10 minutes on the bakery-and-ovens example before touching cost curves.
- How do I grade the exit ticket quickly?
- Four items, one point each. The only one that needs judgment is the graph: check two things, MC through both minimums, and AVC's minimum to the left of ATC's. Give the point only if both are right.
Assign this without the grading
A free pilot semester gets you the teacher dashboard: assign the module and practice set from this plan, run lockdown exams, and see per-student progress. Students never pay either way.
Start your free pilot