Ap Micro Economics Notes

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A.P. Economics - Test #6 Review Name: __________________________ Date: _____________ ___ 1. A monopolistically competitive firm has a downward-sloping demand curve for its product, primarily because: A) there exist no barriers to entry or exit in the long run. B) there are many sellers in the industry. C) the firm sells a product distinct from products sold by competing firms. D) the price is greater than the marginal revenue. ___ 2. Which of the following is most likely to be observed when firms engage mainly in non-price competition? A) actively encouraging the sale of generic, as opposed to brand-name, products B) advertising and product differentiation C) discounts offered through coupons D) low interest rates for financing the purchase of bigticket items ___ 3. A monopolistically competitive firm is operating in the short run, is operating at the optimal level of output, and is earning negative economic profits. Which of the following must be true? A) ATC > P > MR = MC B) ATC = P > MR = MC C) ATC > P = MR = MC D) ATC > P > MR > MC ___ 4. Collusive agreements are typically difficult for cartels to maintain because each firm can increase profits by: A) producing more output than the quantity that maximizes joint cartel profits. B) producing less output than the quantity that maximizes joint cartel profits. C) increasing the price above the price that maximizes joint cartel profits. D) engaging in less advertising than the level of advertising that maximizes joint cartel profits. ___ 5. Which of the following factors increases the likelihood that oligopolists collude? A) There are a large number of firms in the industry. B) A firm and its rivals are currently operating at maximum productive capacity. C) One firm has a significant cost advantage over its rivals. D) A firm and its rivals are currently operating at maximum productive capacity and one firm has a significant cost advantage over its rivals. ___ 6. Gary's Gas and Frank's Fuel are the only two...
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