1 / 10

Microeconomics FRQ Review: Perfect Competition and Monopoly

Understand the key concepts and implications of perfect competition and monopoly, including price determination, market entry, and profit outcomes, with detailed explanations for each scenario. Prepare for FRQs with clear graphs and analysis.

hmcmillan
Download Presentation

Microeconomics FRQ Review: Perfect Competition and Monopoly

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. Problem Set #4 FRQs

  2. FRQ#1 (14 points)

  3. 4 Points 4 Points

  4. B. 1 Point Each (Requires explanation) 1 point- P = MR for perfect competition because the price is constant OR the firm is a price taker 1 point- P > MR for monopoly because the firm must lower the price (of all units) to sell more C. 1 Point Each (Requires explanation) 1 point- For perfect competition, firms will enter, increasing supply, price will fall to minimum ATC and the firm would make a normal profit. 1 point- For monopoly, the firm will continue to make profit since there are high barriers to entry.

  5. D. 1 Point- Correctly labeled DWL 1 Point- DWL is the amount of CS and PS that is lost when a firm underproduces.

  6. FRQ#2 (6 points)

  7. B. 1 Point- Demand is elastic 1 Point (Explanation)- Because MR is greater that zero (positive) OR Because as price falls TR is increasing.

  8. FRQ#3 (5 points)

  9. A. 1 Point- Correctly drawn graph with zero economic profit (ALL OR NOTHING).

  10. B. 1 Point- Firm’s Output doesn’t change 1 Point- A change in fixed costs doesn’t change MC and therefore there is no change in the MR=MC output 1 Point- Profits increase 1 Point- Since fixed costs decrease, ATC will decrease and the firm will make profit.

More Related