AP Microeconomics Review Unit

The image above shows a firm making

• Economic Profit

• Economic loss

• Breaking even

• Shutting down

Should the following firm shutdown?

• Yes

• No

• Not enough information present

Identify the profit maximizing level of output for this monopoly firm.

Identify the profit maximizing level of price for this monopoly firm.

Collusion most frequently occurs in industries that are

• oligopolistic

• monopolistically competitive

• monopolistic

• perfectly competitive

Collusion is difficult for an oligopoly to maintain

• Because antitrust laws make collusion illegal

• Because, in the case of oligopoly, self-interest is in conflict with cooperation

• If additional firms enter of the oligopoly

• For all the above reasons

What is the goal of a firm?

• to make profits

• to maximize profits

• to maximize revenue

• none of the above

A firm expands its fixed resources and its overall costs of production go down. It is experiencing...

• Increasing returns to scale

• Constant returns to scale

• Negative returns to scale

Which of these is NOT a characteristic of Perfectly Competitive markets?

• Many small firms

• Virtually identical products

• High barriers to entry

• No need to advertise

The above figure shows a perfectly competitive firm. If the market price is more than $20 per unit, the firm

• will definitely shut down to minimize its losses.

• will stay open to produce and will make zero economic profit.

• will stay open to produce and will incur an economic loss.

• will stay open to produce and will make an economic profit.

• might shut down but more information is needed about the fixed cost.