AP Microeconomics

The monopolistically competitive seller maximizes profits by producing at the point where:

• Total revenue is at maximum

• Average costs are at minimum

• Marginal revenue = Marginal cost

• Price = Marginal revenue

In long run equilibrium, a monopolistic competitor achieves:

• Neither productive nor allocative efficiency

• Both productive efficiency and allocative efficiency

• Productive efficiency but not allocative efficiency

• Allocative efficiency but not productive efficiency

In the short run, all of the following rules apply to firms operating under imperfect competition as well as to firms in a purely competitive market except:

• To maximize profits, a firm should produce where MR = MC

• The marginal cost curve is upward sloping after initial increasing returns

• The marginal cost curve represents a firm's supply curve is above its AVC curve

• Each firm will produce where its supply and market demand are equal

Mutual interdependence means that each oligopolistic firm

• Faces a perfectly elastic demand for its product

• Must consider the reactions of its rivals when it determines its price policy

• Produces a product identical to the products produced by its rivals

• Produces a product similar but not identical to the products of its rivals

In this graph (a long run equilibrium), the firm will:

• Earn a normal profit

• Shutdown

• Realize a loss

• Realize an economic profit

In long run equilibirium, production for the firm above is:

• Greater than would occur under pure competition

• Less efficient than in a purely competitive market

• More efficient than in a purely competitive market

• Optimally efficient

The demand curve of a monopolistically competitive producer is:

• Perfectly elastic and derived from the market price

• Less elastic than that of either a pure monopolist of purely competitive seller

• More elastic than that of a pure monopolist or a purely competitive seller

• More elastic than a pure monopolist, and less elastic than a purely competitive seller

If the several oligopolistic firms which compromise an industry collude, the resulting price and output will most likely resemble that of

• A regulated monopoly

• Monopolistic competition

• Perfect competition

• Unregulated monopoly

Given the same unit cost data, a monopolistic producer will charge

• The same price and produce the same output as a competitive firm

• A higher price and produce a larger output than a competitive firm

• A higher price and produce a smaller output than a competitive firm

• A lower price and produce a smaller output than a competitive firm

Which of the following statements is true for a monopolist at the profit-maximizing output level?

• Price exceeds marginal revenue

• The demand curve intersects the supply curve

• Marginal cost exceeds price

• Demand is price inelastic