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Microeconomics AP Vocabulary

Total questions: 93

Worksheet time: 2hrs 58mins

Name
Class
Date
1.
The graph shows a(n):
a)
oligopsony
b)
monopoly
c)
monopsony
d)
perfectly competitive factor market and firm
2.

What does marginal mean in the language of economics?

a)

Additional

b)

Less

c)

Satisfaction

d)

I can't believe it's not Butter.

3.

What does utility mean in the language of economics?

a)

Additional

b)

Less

c)

Satisfaction

d)

I can't believe it's not Butter.

4.

If every consumers needs are being met perfectly and every good that is being made is being sold, what type of efficiency is being achieved?

a)

Productive Efficiency

b)

Allocative Efficiency

5.

When there is only one seller of a good or service, they are said to have a?

a)

Monopoly

b)

Oligarchy

c)

Monopolistic Competition

d)

Perfect Competition

6.

When there are only a few sellers of a type of produce, like Smart phones, there is said to be an?

a)

Monopoly

b)

Oligopoly

c)

Monopolistic Competition

d)

Perfect Competition

7.

When there is lots of competition in a market because the barriers to entry are low and there are many substitutes that exist, this is called?

a)

Monopoly

b)

Oligopoly

c)

Monopolistic Competition

d)

Perfect Competition

8.

Laws that are meant to stop monopolies from forming are called?

a)

Anti-Monopoly Laws

b)

Anti-Trust Laws

9.
Price fixing and collusion often occur in this type of market structure
a)
monopoly
b)
oligipoly
c)
perfect competition
d)
monopolistic competition
10.
The airline industry is most likely in the market structure called
a)
perfect competition
b)
oligopoly
c)
monopolistic competition
d)
monopoly
11.
In this market structure there are many buyers and sellers with identical products
a)
perfect competition
b)
monopolistic competition
c)
monopoly
d)
oligopoly
12.

Which of the following is true about an imperfectly competitive firm’s marginal revenue (MR) curve if it has a linear and downward-sloping demand curve?

a)

MR decreases at an increasing rate.

b)

MR increases at first, then decreases.

c)

MR is constant.

d)

MR decreases and is less than demand.

e)

MR is greater than demand.

13.

Petunia’s Pears sells pear cider. There is only one other seller in the market.

a)

monopoly

b)

monopsony

c)

monopolistic competition

d)

perfectly competitive

e)

oligopoly

14.

The market for space travel has the possibility to be very profitable, but it is also likely to be imperfectly competitive.


Which of the following is the most likely reason that the space travel industry is imperfectly competitive?

a)

having no control over price

b)

low barriers to entry

c)

high profits

d)

high start-up costs

e)

low minimum efficient scale relative to the size of the market

15.

Which of the following is true about production in an imperfectly competitive market?

Choose 1 answer:

a)

The amount produced minimizes marginal cost.

b)

Less is produced than is socially optimal.

c)

The amount produced minimizes average total cost.

d)

More is produced than is socially optimal.

e)

The amount produced is the same as in perfect competition.

16.

Priya’s Party Supplies sells cake toppers in a market with many other sellers, but each seller has their own version of cake toppers.


Which of the following statements is true based on this information?

a)

Priya produces a socially optimal quantity.

b)

Priya produces in a perfectly competitive industry.

c)

Priya’s marginal revenue curve is less than her demand curve.

d)

Priya can charge whatever price she wants to for her cake toppers.

e)

Priya’s average total cost curve is below her average variable cost curve.

17.

All of the following are imperfectly competitive markets EXCEPT:

a)

monopolistic competition

b)

pure competition

c)

monopoly

d)

oligopoly

e)

monopsony

18.

For the graph shown here, what quantity will this firm produce and what price will it charge?

a)

Q2 ; P2

b)

Q2 ; P3

c)

Q1 ; P1

d)

Q1 ; P2

e)

Q1 ; P4

19.

If a firm must lower its price to sell more of a good, which of the following must also be true?

a)

Its marginal revenue curve is the same as its marginal cost curve.

b)

Its marginal revenue curve is upward-sloping.

c)

Its marginal revenue curve is lower than its demand curve.

d)

Its marginal revenue curve is equal to its demand curve.

e)

Its marginal revenue curve is higher than its average total cost curve.

20.
A single-price monopolist is currently producing in the inelastic portion of its market demand curve. In order to maximize profits, the monopolist should change the price and quantity in which of the following ways? 
a)
P=Increase; Q=Increase
b)
P=Increase; Q=Decrease
c)
P=Decrease; Q=Decrease
d)
P=No Change; Q=Increase
21.
If the goal of government regulators of a natural monopoly is to reduce deadweight loss without subsidizing the monopolist, government regulators would set a price equal to:
a)
Average variable cost
b)
Average total cost
c)
Average fixed cost
d)
Marginal cost
22.
The profit-maximizing combination of output and price for a single-price monopoly is:
a)
Q1 & P1
b)
Q2 & P3
c)
Q1 & P4
d)
Q3 & P2
23.
If the monopolist could engage in perfect price discrimination, the monopolist’s total output and the price charged for the last unit of output sold would be:
a)
Q1 & P1
b)
Q2 & P3
c)
Q1 & P2
d)
Q3 & P2
24.
A firm with market power engages in price discrimination to:
a)
earn a higher profit
b)
increase consumer surplus
c)
decrease deadweight loss
d)
make its demand more elastic 
25.
Compared to a perfectly competitive industry with the same demand and cost curves, a monopoly’s price and quantity will be which of the following? 
a)
P=Higher; Q=Same
b)
P=Lower; Q=Same
c)
P=Lower; Q=Higher
d)
P=Higher; Q=Lower
26.
For the firm shown in the graph above, the short- run, profit-maximizing strategy would be to set output at:
a)
Q1, price at P3, and earn an economic profit 
b)
Q1, price at P1, and suffer a loss 
c)
Q2, price at P2, and earn an economic profit 
d)
Q2, price at P2, and earn only a normal profit 
27.
For an unregulated monopolist, the profit-maximizing quantity will always be:
a)
in the elastic region of the demand curve 
b)
where marginal revenue equals price 
c)
where price equals average total cost 
d)
where the marginal cost curve intersects the demand curve 
28.
A monopolist introduces a technological innovation that lowers the marginal cost and average cost of production. The price of the good and the quantity are most likely to change in which of the following ways? 
a)
P=Decrease; Q=Increase
b)
P=Decrease; Q=Decrease
c)
P=Increase; Q=Increase
d)
P=Increase; Q=Decrease
29.
This monopoly will maximize profits at what price?
a)
A
b)
B
c)
C
d)
R
30.
Economic profits for this monopoly are represented by area:
a)
0CGE
b)
0AJE
c)
AJHB
d)
BAJN
31.
Total costs for this monopoly are represented by area:
a)
BKL0
b)
CGE0
c)
AJE0
d)
BHE0
32.
Total revenue for this monopoly is represented by area:
a)
0CGE
b)
0AJE
c)
AJHB
d)
BAJH
33.
For this monopolist, what is the area of consumer surplus?
a)
ABHJ
b)
AJGC
c)
ARJ
d)
ARJE
34.
This perfect competitor will maximize profits at what output level?
a)
A
b)
B
c)
C
d)
D
35.
This perfect competitor will shut down below which price/output relationship?
a)
K
b)
M
c)
L
d)
R
36.
At output level C, total variable cost is represented by the area of which rectangle?
a)
0GKC
b)
FGKJ
c)
0EHC
d)
0FJC
37.

Christy's Haircuts, the sole supplier of haircuts in a small town, faces the demand schedule shown in the table above. What is Christy's marginal revenue from the 25th haircut?

a)

zero

b)

$5

c)

$7

d)

$5.50

38.

Roxie's Movie Theatre is the only one in town. The table above gives the demand schedule for movies. If Roxie's is a single-price monopoly and the marginal cost of a movie is $6, Roxie's will charge ________ a movie and will sell ________ movie tickets a week.

a)

$15; 100

b)

$12; 200

c)

$6; 400

d)

$9; 300

39.

For the unregulated, single-price monopoly shown in the figure above, when its profit is maximized, output will be

a)

4 units per year and the price will be $6.

b)

4 units per year and the price will be $4.

c)

6 units per year and the price will be $4.

d)

None of the above answers is correct.

40.

Sue's Surfboards is the sole renter of surfboards on Big Wave Island. Sues demand and marginal revenue curves are illustrated in the figure above. Sue's Surfboards currently rents 15 surfboards an hour. Sue's total revenue from the 15 surfboards is

a)

$300

b)

$220

c)

$150

d)

$100

41.

Gene's Car Wash is a natural monopoly. To wash 100 cars a week, if Gene is unregulated, he would charge a price of $10. Gene's long-run average cost for washing 100 cars is $8, his average variable cost is $6, and his marginal cost is constant at $4. If Gene was regulated using a marginal cost pricing rule, the price he would be allowed to charge to wash 100 cars is

a)

$10

b)

$8

c)

$6

d)

$4

42.

A monopoly can price discriminate between two groups of consumers if each group has

a)

a large consumer surplus.

b)

a different willingness to pay.

c)

the same willingness to pay.

d)

the ability to resell the good to the other group.

43.
Which of the following statements correctly identifies a difference between perfect competition and monopolistic competition? 
a)
In perfect competition there are no barriers to entry, but there are strong barriers in monopolistic competition. 
b)
In perfect competition there are many firms, but in monopolistic competition there are only a few firms. 
c)
In perfect competition the firms all sell products that are exactly the same, but in monopolistic competition each firm sells a slightly differentiated product. 
d)
In perfect competition there are few consumers, but in monopolistic competition there are many consumers. 
44.
Monopolistically competitive firms are considered inefficient in allocating society’s resources for which of the following reasons? 
a)
In long-run equilibrium, the marginal benefit exceeds the price charged by the firms. 
b)
In long-run equilibrium, the price is greater than the marginal cost. 
c)
In long-run equilibrium, average total costs are minimized.
d)
In long-run equilibrium, the firm is earning economic profits. 
45.
Which of the following market structures results in allocative efficiency? 
a)
Monopoly
b)
Monopolistic Competition
c)
Perfect Competition
d)
Oligopoly
46.
Which of the following is true of a monopolistically competitive firm in long-run equilibrium? 
a)
Price equals marginal cost and average total cost. 
b)
Price equals average total cost but is greater than marginal cost. 
c)
Price equals marginal cost and is greater than average total cost. 
d)
The firm earns positive economic profits by producing at minimum average cost. 
47.
The graph shows a monopolistically competitive firm:
a)
making a profit in the short-run
b)
incurring a loss in the short-run
c)
making a profit in the long-run
d)
breaking even in the long-run
48.
In the long-run, the ATC will be tangent to the demand curve at:
a)
Q1
b)
Q2
c)
Q3
d)
none of the above
49.
Let P = price, MR = marginal revenue,
MC = marginal cost, and ATC = average total cost. In monopolistic competition, which of the following most accurately describes the long-run equilibrium conditions for a firm? 
a)
P>ATC, MR=MC, and P>MC 
b)
P=ATC, MR=MC, and P=MC 
c)
P=ATC, MR=MC, and P>MC 
d)
P=ATC, MR>MC, and P>MC 
50.
A monopolistically competitive firm advertises in order to:
a)
shift the demand curve for its product to the left 
b)
make its product more similar to its competitors’ 
c)
reduce the industry’ s barriers to entry 
d)
make the demand for its product less price elastic 
51.

Product differentiation refers to

a)

Features that make one product appear different from competing products in the same market.

b)

The selling of identical products in different markets.

52.
The characteristic of oligopolistic firms that makes them different from all other types of firms is that oligopolistic firms:
a)
Advertise their products
b)
Consider each other's decisions
c)
Produce differentiated products
d)
Face high barriers to entry
53.
A market structure in which a few large firms dominate a market
a)
Perfect Competition
b)
Monopolistic Competition
c)
Oligopoly
54.

The above image is an example of...

a)

Pure Competition

b)

Monopolistic Competition

c)

Oligopoly

d)

Non-Price Competition

55.
A price war occurs when competing sellers________ their prices _____________________.
a)
drop, below the competition
b)
drop, above the competition
c)
raise, below the competition
d)
raise, below the competition
56.

Define collusion

a)

When two cars collide on the road

b)

a secret agreement between two competing firms to sell their similar products at the same price

57.
___________ is an agreement among competing businesses to sell products for the same or similar prices.
a)
Price fixing
b)
Price gouging
c)
Price wars
d)
Price discrimination
58.
The jeans industry would fall into what type of market structure? ( jeans are similar but there are some differences in the product)
a)
monopoly
b)
oligopoly
c)
perfect competition
d)
monopolistic competition
59.
When a major car company lowers its prices, other car makers will probably 
a)
maintain existing prices.
b)
raise their prices.
c)
go out of business.
d)
lower their prices.
60.
a)

Neither company has a dominant strategy

b)

Both companies have an incentive to reduce production by %10

c)

Both companies have an incentive to reduce production by %20

d)

Only UA have an incentive to reduce production by %20

e)

Only UB have an incentive to reduce production by %20

61.

Game theory is used to explain

a)

why firms price discriminate

b)

how monopolies evolve into oligopolies

c)

strategic behavior of firms in oligopoly

d)

profit maximization in monopoly

e)

price leadership of monopolistic competition

62.

Based on the payoff matrix, which of the following is correct?

a)

Firm A always gets a smaller share of the industry profits.

b)

Firm A’s dominant strategy is to advertise.

c)

Firm B’s dominant strategy is not to advertise.

d)

The dominant strategy for both firms is not to advertise.

e)

Neither firm has a dominant strategy.

63.

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

a)

it is best for each firm given what the other firm has chosen

b)

the total industry profits are maximized

c)

Firm A has an incentive to change its strategy and chooses not to advertise

d)

it is the best outcome for Firm B regardless of what firm A does

e)

advertising is always the best strategy for Firm A

64.

Which value (in percentage form) of the four-firm concentration ratio is most likely to indicate a monopolistically competitive market?

a)

2%

b)

30%

c)

60%

d)

100%

65.

The Herfindahl index is:

a)

the sum of the squared percentage market shares of all firms in the industry.

b)

the sum of the market shares for the top 10 firms in the industry.

c)

a measure of product differentiation in the market.

d)

a measure of how easy it is for new firms to enter the market.

66.

In the long run, new firms will enter a monopolistically competitive industry:

a)

provided economies of scale are being realized.

b)

even though losses are incurred in the short run.

c)

until minimum average total cost is achieved.

d)

until economic profits are zero.

67.

If profits are negative in a monopolistically competitive market, then:

a)

new firms will enter until profit returns to the optimal positive level.

b)

new firms will enter the market until economic profits are zero.

c)

firms will exit the market until economic profit returns to the optimal positive level.

d)

firms will exit the market until economic profit returns to zero.

68.

Which of the following characterizes monopolistic competition?

a)

Price leadership.

b)

Zero long-run profit.

c)

Retaliation.

d)

Marginal cost pricing.

69.

A monopolistically competitive firm maximizes profits or minimizes losses in the short run by

a)

Setting price equal to marginal cost.

b)

Producing at the output level where ATC is minimized.

c)

Producing at the output level where MR equals MC.

d)

Producing at the output level where MC equals ATC.

70.

In the above figure, the monopolistically competitive will experience what change into the long run?

a)

a right shift of it's demand curve.

b)

a left shift of it's demand curve.

c)

a right shift of it's supply curve.

d)

a left shift of it's supply curve.

71.

If this graph is for a monopolistically competitive firm, it best represents

a)

short run economic loss.

b)

short run extra-normal profit.

c)

long run economic profit.

d)

long run equilibrium at normal profit.

e)

short run accounting loss.

72.

This firm will charge a price of _____ and make a per unit ___ of _____.

a)

70; loss; 10.

b)

60; normal profit; 0.

c)

70; profit; 3.5.

d)

60: profit; 10.

e)

70; profit; 10.

73.

This firm will charge a price of _____ and make a per unit ___ of _____.

a)

7; loss; 1.5.

b)

7; normal profit; 0.

c)

7; profit; 1.5.

d)

5.5: loss; 1.5.

e)

5.5; profit; 1.5.

74.
What is the equilibrium of the below game?
a)
A,X
b)
A,Y
c)
B,X
d)
B,Y
75.

When firms openly agree on price, output, and other decisions aimed at achieving monopoly profits, those firms are practicing

a)

overt collusion

b)

tacit collusion

c)

price leadership

d)

price-taking behavior

e)

price discrimination

76.

The cartel model of oligopoly predicts that

a)

all firms in the industry act in unison to set monopoly price

b)

each producer acts independently of others

c)

firms follow the low-price firm in the industry

d)

differences in cost of production discourage individual firms from cheating

e)

the markup on marginal cost should be the same for all firms

77.
An example of a market that is NOT an oligopoly is one for...
a)
soft drinks 
b)
cars 
c)
athletic shoes 
d)
corn
78.
The most recognizable form of non-price competition is? 
a)
More Locations 
b)
Better Customer Service
c)
Advertising 
d)
Low Price 
79.
According to the payoff matrix, what is YELLOW'S dominant strategy?
a)
high
b)
low
80.

What would facilitate collusion between firms in an oligopolistic industry

a)

An increase in the number of firms

b)

large fluctuations in demand

c)

rapid changes in technology

d)

a standardised product

81.
The following table shows the profits associated with the pricing strategies of two oligopolistic firms, Agronomia and Farmingdale. Each firm has two possible strategies: to charge a low price or a high price. The first entry in each cell shows the profits to Agronomia and the second the profits to Farmingdale. If the two firms do not cooperate, what will be the profit for each firm?
a)
Agronomia = $50; Farmingdale = $100
b)
Agronomia = $150; Farmingdale = $150
c)
Agronomia = $300; Farmindale = $50
d)
Agronomia = $100; Farmingdale = $100
82.
E Soda and R Soda are the only two firms in
the soft-drink industry. The companies cannot cooperate. Each firm can follow a high-price strategy or a low-price strategy for pricing its product. In the payoff, the first entry in each cell shows the profits to E Soda and the second entry shows the profits to R Soda. It can be concluded that: 
a)
neither E Soda nor R Soda has a dominant strategy
b)
E Soda has a dominant strategy but R Soda does not
c)
Both firms will choose the high-price strategy
d)
Both firms will choose the low-price strategy
83.
Evergreen and Nature View are bidding for
a landscaping contract. The payoff matrix shows what each firm’s total weekly profits from all its operations will be for each combination of bids. The first entry in each cell shows Evergreen’s profit, and the second entry in each cell shows Nature View’s profit. A Nash equilibrium results under which of the following conditions? 
a)
When both firms bid low 
b)
When Evergreen bids high and Nature View bids low 
c)
When both firms bid high and when both firms bid low 
d)
When Evergreen bids low, no matter what Nature View’s bid is 
84.
Assume that Alpha and Beta are the only sellers of a product and they do not cooperate. Each firm has to decide whether to raise the product price. The payoff matrix gives the profits, in dollars, associated with each pair of pricing strategies. The first entry in each cell shows the profits to Alpha, and the second, the profits to Beta. What is the dominant strategy for each firm?
a)
Alpha: Do Not Raise; Beta: Do Not Raise
b)
Alpha: Do Not Raise; Beta: Raise
c)
Alpha: No Dominant Strategy; Beta: Raise
d)
Alpha: Raise; Beta: Do Not Raise
85.
The payoff matrix shows the per-unit profits associated with the production strategies of two utility companies, UA and UB. Each firm has two choices: to reduce production by 10 percent or by 20 percent. The first entry in each cell indicates the profits to UA, and the second, the profits to UB. Assuming no cooperation, which statement is true?
a)
Neither company has a dominant strategy 
b)
Both companies have an incentive to reduce production by 10%
c)
Both companies have an incentive to reduce production by 20%
d)
Only UA has an incentive to reduce production by 20%
86.
Suppose that the two biggest producers of gold, Bmine and Gmine, form a cartel to set price. However, each has the option to cheat or to not cheat on the agreement. The table shows the payoffs from these strategies, with the first entry in each cell representing the payoff to Bmine and the second representing the payoff to Gmine. What is the dominant strategy for each firm?
a)
Neither Gmine nor Bmine has a dominant strategy 
b)
Gmine’s dominant strategy is to cheat; Bmine does not have a dominant strategy 
c)
Gmine’s dominant strategy is to not cheat; Bmine does not have a dominant strategy 
d)
Gmine’s dominant strategy is to not cheat; Bmine’s dominant strategy is to cheat
87.
What is the equilibrium of the below game?
a)
A,X
b)
A,Y
c)
B,X
d)
B,Y
88.
According to the payoff matrix, what will YELLOW do if white goes high?
a)
high
b)
low
89.

One of the assumptions underlying the kinked demand curve is that oligopolists

a)

Sell to consumers who are less sensitive to price increases than price decreases

b)

Expect their rivals to match any reduction in price

c)

Leave their prices unchanged if a competitor reduces his price

d)

Increase their prices in response to an increase in the price charged by a competitor

90.
List the four market structures in order from least competitive to most competitive.
a)
Oligopoly, Monopoly, Perfect Competition, Monopolistic Competition
b)
Perfect Competition, Oligopoly, Monopoly, Monopolistic Competition
c)
Monopoly, Oligopoly, Monopolistic Competition, Perfect Competition
d)
Monopoly, Monopolistic Competition, Perfect Competition, Oligopoly
91.
This market structure has 3-4 firms who dominate 70-80% of the industry. 
a)
Monopoly
b)
Monopolistic Competitio
c)
Perfect Competitio
d)
Oligopoly 
92.

Markets like automobiles, cell phones, cable TV, and internet providers are examples of which market structure?

a)

Monopoly

b)

Oligopoly

c)

Perfect competition

d)

Monopolistic competition

93.

In an oligopoly, firms will produce between quantities ____ and ____.

a)

M;N

b)

M;Q

c)

N:R

d)

N:Q

e)

Q:R

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