Loading test…

AP Microeconomics Unit 4: Imperfect Competition

12 questions

Header banner

Unit 4: Imperfect Competition

0 of 12 answered

~7 min left

Question 1

In game theory, a dominant strategy is best described as:

A.The strategy that maximizes a player's payoff only when the opponent cooperates.B.The best strategy for a player regardless of what the other player does.C.The strategy that leads to the highest combined payoff for both players.D.A strategy adopted by the larger firm in an oligopoly to lead the market.

Question 2

Compared to the competitive outcome, a profit-maximizing monopolist produces at a quantity where:

P = M C

, achieving allocative efficiency.B.Output is lower and price is higher, creating deadweight loss.C.Output is higher and price is lower because monopolists have economies of scale.D.Price equals average total cost, ensuring zero economic profit.

Question 3

Which of the following is a barrier to entry that enables a monopoly to earn long-run economic profit?

A.Economies of scale that allow existing firms to produce at lower cost than potential entrants.B.A large number of competing firms producing identical products.C.Perfect information for all consumers about available substitutes.D.Free entry by new firms attracted by positive economic profits.

Question 4

A monopolist practicing perfect price discrimination (1st-degree price discrimination) compared to a single-price monopolist would:

A.Produce less output and earn less profit.B.Produce the same output but charge different prices to different consumers.C.Eliminate deadweight loss by expanding output to the competitive level.D.Reduce producer surplus because charging different prices costs more to administer.

Question 5

A monopolist faces the demand schedule below. What is the marginal revenue of the 3rd unit?

Quantity	Price
1	$10∣∣2∣$ 8
3	$6∣∣4∣$ 4

A.$6B.$2C.$18D.

- 2

In-content ad

Question 6

In an oligopoly where firms collude to form a cartel, what is the most likely long-run outcome?

A.The cartel remains stable because all firms benefit equally from cooperation.B.The cartel breaks down as individual firms have incentives to cheat by producing above quota.C.The cartel converts the market into a perfectly competitive equilibrium over time.D.Prices fall to marginal cost immediately because cartel agreements are illegal.

Question 7

A natural monopoly exists when:

A.A single firm controls a key natural resource needed to produce the good.B.A single firm can serve the entire market at a lower average cost than two or more firms could.C.Government grants an exclusive license to one firm to operate in a market.D.A firm's average total cost is minimized at a quantity larger than market demand.

Question 8

A monopolistically competitive firm in long-run equilibrium operates with excess capacity because:

A.It faces a perfectly elastic demand curve and must accept the market price.B.It produces at a quantity less than the minimum efficient scale (minimum ATC).C.It produces where price equals marginal cost, fully exhausting potential gains from trade.D.It is forced by government regulation to maintain a reserve production capacity.

Question 9

Two firms are deciding whether to advertise. The payoff matrix (Firm A profit, Firm B profit) is:

	B Advertises	B Doesn't Advertise
A Advertises	(4, 4)	(10, 2)
A Doesn't Advertise	(2, 10)	(8, 8)

What is the Nash equilibrium outcome?

A.Both firms advertise, each earning a profit of 4.B.Neither firm advertises, each earning a profit of 8.C.Only Firm A advertises, earning a profit of 10.D.Firm A does not advertise; Firm B advertises — the Pareto-optimal outcome.

Question 10

In which market structure do firms produce differentiated products, face a downward-sloping demand curve, and earn zero economic profit in the long run?

A.Perfect competitionB.MonopolyC.Monopolistic competitionD.Oligopoly

In-content ad

Question 11

A monopolist's deadweight loss is best represented graphically by:

A.The rectangle between the monopoly price and the competitive price, times the monopoly quantity.B.The triangle between the demand curve, the MC curve, and the monopoly quantity.C.The area below the MC curve and above the equilibrium price.D.The entire area between the demand curve and the MC curve at all output levels.

Question 12

Second-degree price discrimination (quantity discounts) differs from third-degree price discrimination primarily because:

A.Second-degree discrimination targets individual consumers; third-degree targets market segments.B.Second-degree discrimination uses quantity blocks that allow consumers to self-select; third-degree separates consumers into identifiable groups.C.Third-degree discrimination requires lower prices in all markets, while second-degree requires higher prices.D.Second-degree discrimination eliminates all deadweight loss; third-degree does not.

AP Microeconomics Unit 4: Imperfect Competition — Free with Answer Explanations | Test Practice Hub