FREE AP Microeconomics Market Structures Questions and Answers
What is the key difference between monopolistic competition and perfect competition?
In monopolistic competition, firms sell differentiated products, unlike perfect competition where products are identical. This differentiation gives firms some price-setting power.
In a monopoly, the marginal revenue curve:
In a monopoly, the marginal revenue curve lies below the demand curve because the firm must lower the price to sell additional units, reducing the marginal revenue of each unit.
Which of the following is true in a monopolistic competition market in the long run?
In the long run, firms in monopolistic competition earn zero economic profit due to the entry of new firms, which erodes profits. However, they do not produce at minimum average total cost due to excess capacity.
What is a dominant strategy in game theory?
A dominant strategy is the best choice for a player, no matter what the other players do. It is commonly analyzed in oligopoly settings using game theory.
Which of the following is a characteristic of perfect competition?
In a perfectly competitive market, firms are price takers because no single firm can influence the market price. Products are identical, and there are no barriers to entry or exit.