- If a market for a good is producing a negative
externality,
(A) at the market output the marginal costs to
society exceed the private marginal costs of
production.
(B) at the market output the marginal benefits
to society exceed the private marginal costs
of production.
(C) at the market output the marginal costs to
society exceed the total benefits to society.
(D) at the market output the private marginal
costs of production exceed the marginal
costs to society.
(E) at the market output the marginal benefits to
society exceed the marginal costs to society.
- Which of the following is a characteristic of a
monopoly market?
(A) Firms produce a homogeneous product.
(B) Barriers to entry exist.
(C) Firms are price-taking profit maximizers.
(D) Deadweight loss is eliminated through
entry of competing firms in the long run.
(E) In the long run the firm earns normal profits.
- A monopolist may be able to maintain long-run
positive profit due to
(A) deadweight loss.
(B) economies of scale in production.
(C) a price that is set equal to average total cost.
(D) perfectly elastic demand for the product.
(E) entry of new firms that keep the price high.
Questions 41 and 42 refer to the graph below.
- If this firm were a profit-maximizing monopolist,
the price, output, and profit would be
PRICE OUTPUT PROFIT
(A) P 5 Q 1 Q 1 ¥(c–b)
(B) P 5 Q 1 Q 1 ¥P 1
(C) P 4 Q 2 Q 2 ¥(P4–P1)
(D) P 1 Q 1 Q 1 ¥(P5–P1)
(E) P 3 Q 3 Q 3 ¥P 3
- Consumer surplus in the monopolist market is
equal to the area
(A) abce.
(B) abcf.
(C)P5cd.
(D) 0Q1aP1.
(E)P 1 P5ca.
- The top six firms in an oligopolistic industry
have market shares of 25%, 25%, 15%, 10%,
6%, and 3%. Many smaller firms split the rest
of the market. What is the value of the four-
firm concentration ratio?
(A) 65%
(B) 54%
(C) 75%
(D) 34%
(E) 50%
Marginal cost
Average total cost
Q 1
P 1
P 4
P 2 b
a
P 3
c
Output
$
0
Demand
Marginal Revenue
Q 2
e
f
Q 3
d
P 5
AP Microeconomics Practice Exam 2 ‹ 195
