AP Micro Imperfect Competition 4.1 - 4.3

Which of the following best describes characteristics of imperfect competition?

• Identical products, no barriers to entry, price takers

• Differentiated products, some market control, barriers to entry

• Perfect knowledge, infinite buyers and sellers, free entry and exit

• Standardized goods, zero economic profit in the long run, identical products

Which of the following is NOT considered a common barrier to entry?

• High startup costs

• Patents or legal restrictions

• Perfect information among consumers

• Established brand loyalty by existing firms

Which of the following is a valid distinction between perfect and imperfect competition?

• Perfect competition has no barriers to entry; imperfect competition has many barriers to entry.

• Perfect competition involves differentiated products; imperfect competition involves homogeneous products.

• Firms in perfect competition are price makers, while firms in imperfect competition are price takers.

• Perfect competition results in long-term economic profits, while imperfect competition does not.

Which statement accurately identifies a similarity between perfect and imperfect competition?

• Both result in allocative efficiency in the long run.

• Both produce significant deadweight loss in the long run.

• Both feature price-making firms that can control market outcomes.

• Both allow firms to earn economic profits in the short run.

Which of the following statements about monopolies is FALSE?

• All monopolies make a profit.

• Monopolies can be efficient under certain circumstances.

• Monopolies may exist legally if they result from patents or innovation.

• A monopoly typically controls more than 40% of the market share in its industry.

Why does marginal revenue (MR) fall below demand in a monopoly?

• Monopolies produce at higher quantities than perfect competition, lowering MR.

• Monopolies face a perfectly elastic demand curve, causing MR to drop quickly.

• Marginal revenue is unrelated to demand in a monopoly.

• Monopolies must lower the price to sell additional units, reducing MR.

What is one way a monopoly can be GOOD for the economy?

• They always result in lower prices due to scale economies.

• They ensure productive and allocative efficiency by maximizing output.

• They operate at economies of scale, lowering production costs, making it impractical to have many firms.

• They eliminate consumer surplus, redistributing wealth evenly.

Where does a monopoly determine its profit-maximizing output?

• At the intersection of the demand curve and marginal cost (MC) curve

• At the point where marginal revenue (MR) equals marginal cost (MC)

• At the price where total revenue equals total cost

• t the intersection of the average total cost (ATC) curve and the demand curve

What is the primary reason monopolies are considered inefficient?

• They underproduce relative to socially optimal levels, creating deadweight loss.

• They operate where price equals marginal cost, causing overproduction.

• They allocate all consumer surplus to producers, maximizing efficiency.

• They drive competitors out of the market, leading to allocative efficiency.

Which graph represents a monopoly?

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