AP®︎ Microeconomics: Topic 4.5 Practice Test
Prepare for your quiz, test, or the AP exam with focused practice questions on Topic 4.5 of AP Microeconomics – Oligopoly and Game Theory.
Questions List
Topic 4.5
Question 1 Easy
This question tests the following: PRD-3.C.1
An oligopoly is best described as a market structure with:
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 4.5: Oligopoly and Game Theory
Learning Objective: PRD-3.C
a. Define (using tables as appropriate) key terms, strategies, and concepts relating to oligopolies and simple games. b. Explain (using tables as appropriate) strategies and equilibria in simple games and the connections to theoretical behaviors in various oligopoly market and non-market settings. c. Calculate (using tables as appropriate) the incentive sufficient to alter a player’s dominant strategy.
Essential Knowledge: PRD-3.C.1
An oligopoly is an inefficient market structure with high barriers to entry, where there are few firms acting interdependently.
Essential Knowledge: PRD-3.C.2
Firms in an oligopoly have an incentive to collude and form cartels.
Essential Knowledge: PRD-3.C.3
A game is a situation in which a number of individuals take actions, and the payoff for each individual depends directly on both the individual’s own choice and the choices of others.
Essential Knowledge: PRD-3.C.4
A strategy is a complete plan of actions for playing a game; the normal form model of a game shows the payoffs that result from each collection of strategies (one for each player).
Essential Knowledge: PRD-3.C.5
A player has a dominant strategy when the payoff to a particular action is always higher independent of the action taken by the other player.
Essential Knowledge: PRD-3.C.6
A Nash equilibrium is a condition describing the set of actions in which no player can increase his or her payoff by unilaterally taking another action, given the other players’ actions. Exclusion: Dominant strategies and Nash equilibrium with more than two players or more than two actions per player, mixed-strategy equilibria, extensive form games, and normal form games with more than two players or more than two actions per player are beyond the scope of the course and the AP Exam.
Essential Knowledge: PRD-3.C.7
Oligopolists have difficulty achieving the monopoly outcome for reasons similar to those that prevent players from achieving a cooperative outcome in the Prisoner’s Dilemma; nevertheless, prices are generally higher and quantities lower with oligopoly (or duopoly) than with perfect competition.
