College Board-Aligned Original Notes
AP Microeconomics Unit 6 Topic 2: Externalities
Explain Externalities by identifying decision-makers, incentives, constraints, and graph shifts.
Unit 6: Market Failure and the Role of Government. College Board exam weighting listed for this unit: 8%-13% of exam score.
What to Know
- Know what each curve represents before deciding whether it shifts.
- Separate short-run and long-run effects when the model requires it.
- Label axes, curves, equilibrium points, and the direction of change.
- Always connect this topic back to the larger unit: Market Failure and the Role of Government.
Detailed Notes
Externalities should be analyzed as a chain of cause and effect. Identify the initial condition, the change, the affected model, and the final outcome.
In AP Microeconomics, graphs are not decoration. Curves represent behavior or constraints, so every shift or movement should match an economic explanation.
For AP-style answers, label the graph clearly and write the story in words: who responds, what changes, why the model moves, and what happens to price, quantity, output, employment, interest rates, or welfare.
Quick Practice
How would you explain Externalities in one or two AP-style sentences?
Name the concept, apply it to a specific example or source, and explain the reasoning that connects the evidence to your answer.
Related Topics in This Unit
- Socially efficient and inefficient market outcomes
- Public and private goods
- The effects of government intervention in different market structures
- Income and wealth inequality