AP®︎ Microeconomics: Topic 4.4 Practice Test
Prepare for your quiz, test, or the AP exam with focused practice questions on Topic 4.4 of AP Microeconomics – Monopolistic Competition.
Questions List
Topic 4.4
Question 1 Easy
This question tests the following: PRD-3.B.10
What type of market structure is characterized by many firms selling differentiated products?
What You’re Being Tested On:
Explore the learning objectives taken directly from the College Board’s AP® Microeconomics Curriculum. Ensure you’re prepared for the exact topics covered on the AP® exam, in-class tests, and quizzes, and gain confidence in your mastery of the material.
Topic 4.4: Monopolistic Competition
Learning Objective: PRD-3.B
b. Explain (using graphs where appropriate) equilibrium, firm decision making, consumer surplus, producer surplus, profit (loss), and deadweight loss in imperfectly competitive markets and why prices in imperfectly competitive markets cannot be relied on to coordinate the actions of all possible market participants and can lead to inefficient outputs. c. Calculate (using data from a graph or table as appropriate) areas of consumer surplus, producer surplus, profit (loss), and deadweight loss in imperfectly competitive markets.
Essential Knowledge: PRD-3.B.10
In a market with monopolistic competition, firms producing differentiated products may earn positive, negative, or zero economic profit in the short run. Firms typically use advertising as a means of differentiating their product. Free entry and exit drive profits to zero in the long run. The output level, however, is smaller than the output level needed to minimize average total costs, creating excess capacity. The price is greater than marginal cost, creating allocative inefficiency.
