AP Micro Microeconomics: Market Structures 2

Question 1

In an oligopoly, the kinked demand curve model predicts that if one firm raises its price above the kink, rivals will:

Accepted Answer

Not follow, leaving the firm with fewer customers

Answer

Match the price increase to maintain market share

Answer

Lower their prices to gain market share

Answer

Exit the market due to reduced profitability

Question 2

Which condition is true for a monopolistically competitive firm in long-run equilibrium?

Accepted Answer

Price equals average total cost

Answer

Price equals marginal cost

Answer

Economic profit is positive

Answer

The firm produces at minimum average total cost

Question 3

A natural monopoly arises when:

Accepted Answer

Long-run average costs continuously decline over the relevant range of market demand

Answer

A single firm owns all inputs needed for production

Answer

Government grants an exclusive operating license

Answer

A firm achieves economies of scale in the short run

Question 4

Game theory is most useful for analyzing which market structure?

Accepted Answer

Oligopoly

Answer

Perfect competition

Answer

Monopoly

Answer

Monopolistic competition

Question 5

Compared to a perfectly competitive market, a monopoly produces:

Accepted Answer

Less output at a higher price

Answer

More output at a lower price

Answer

The same output at a higher price

Answer

More output at a higher price

Question 6

Which of the following is a characteristic of monopolistic competition but NOT perfect competition?

Accepted Answer

Product differentiation

Answer

Many buyers and sellers

Answer

Free entry and exit in the long run

Answer

Price-taking behavior by firms

Question 7

The Herfindahl-Hirschman Index (HHI) is used to measure:

Accepted Answer

The degree of market concentration

Answer

A firm's price elasticity of demand

Answer

The deadweight loss from monopoly

Answer

The efficiency of price discrimination