AP Micro Unit IV Exam: Imperfect Competition

Front

Game Theory is used to explain:

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Strategic behavior of firms in oligopoly

Front

Assume a profit maximizing monopoly was subject to a lump sum tax. Which of the following will occur? Price and quantity will stay the same, Price will increase and quantity will decrease, Price will increase but quantity will stay the same, The consumer surplus would get smaller, The monopoly would produce the socially optimal quantity

Back

Price and quantity will stay the same

Front

Assume that Prescott Pharmaceuticals, which holds patents on Vaxadrin, Vaxadrine, and Vaxadrone is an unregulated monopolist. Its profit-maximizing quantity will always be somewhere in the region of the demand curve where marginal revenue is positive.

Back

in the region of the demand curve where marginal revenue is positive

Front

rice (Demand) exceeds marginal revenue for the pure monopolist because: to sell more the monopolist must lower its price

Back

to sell more the monopolist must lower its price

Front

Based on the payoff matrix, which of the following is correct?
Options: Firm A always gets a smaller share of the industry profits, Firm A’s dominant strategy is to advertise, Firm B’s dominant strategy is not to advertise, The dominant strategy for both firms is not to advertise, Neither firm has a dominant strategy.

Back

Firm A’s dominant strategy is to advertise

Front

The combination where Firm A advertises and Firm B does not advertise is Nash Equilibrium because:

Back

It is best for each firm given what the other firm has chosen.

Front

One difference between oligopolies and monopolistically competitive markets is that: There are fewer firms in oligopolistic markets than in monopolistically competitive ones

Back

There are fewer firms in oligopolistic markets than in monopolistically competitive ones

Front

Pure monopolists may obtain economic profits in the long run because: barriers to entry keep other firms from entering the market

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barriers to entry keep other firms from entering the market

Front

What is the profit-maximizing price and quantity? Options: P1 Q1, P2 Q4, P3 Q3, P4 Q2, P5 Q1

Back

P5 Q1

Front

If the government were to regulate the monopoly pictured in the graph so that they must produce at the "socially optimal" amount, what would be the price and quantity?

Back

Q2 P4