Download MICRO Unit 4 Problem Set

1. _____/25
2. _____/15
3. _____/15
Name: ___________________________
4._____/10
5._____/35
Team: ___________________________
Total: _____/100
Unit IV: Imperfect Competition
Problem Set #4
1. Practice FRQs
a. FRQs #1-4 (____/10)
b. FRQs #5-7 (____/15)
2. Complete the following worksheets:
a. “Regulating Monopolies” (____/5)
b. “A Quick Review of Perfect Competition and Monopoly” (____/5)
c. Market Structure Venn Diagram (_____/5)
3. Use the chart to complete the following:
a. Explain why the MR curve is less than the demand curve for all imperfectly competitive firms. Use a
SPECIFIC numerical example from the chart in your explanation. ( ____/5)
b. On a large graph, PLOT the demand and marginal revenue curves. On a new graph below the D-MR
graph, plot the Total Revenue. Use the total revenue test to EXPLAIN the elastic and inelastic range
of the demand curve. Be sure to identify the elastic and inelastic ranges. (____/5)
c. Use the chart to identify the following: (_____/5)
a. The profit maximizing price and quantity.
b. The ATC at the profit maximizing quantity
c. The profit per unit at the profit maximizing quantity
d. Socially Optimal (allocatively efficient) price and quantity
e. The amount the government would need to subsidize PER UNIT to get the monopoly to
produce the allocatively efficient output.
Price
$110.00
100
90
80
70
60
50
40
30
20
Quantity
Demanded
0
1
2
3
4
5
6
7
8
9
Total
Marginal
Revenue Revenue
Total
Cost
$100
140
160
170
200
240
290
350
420
520
Marginal
Cost
Profit
4. Write a paragraph for each of the following; be sure to include all the key points of the market structures:
a. Compare Monopolistic Competition and Perfect Competition.(____/5)
b. Explain Oligopoly, including colluding/non-colluding, kinked demand and game theory. (____/5)
5. (_____/35 Points Total) Create a well-organized study guide that includes the essential concepts and
graphs for each of the four market structures. Points will be awarded according to the following criteria:
a. Structure
i. Well organized information that is easily accessible with clear and well-drawn
graphs(____/5)
b. Explanation of General Concepts: (____/5)
i. Profit Maximizing Rule
ii. Short-Run Supply Curve and Shut-down Point
iii. Productive Efficiency
iv. Allocative Efficiency
v. Excess Capacity
c. Inclusion of key graphs
i. Costs of Production (____/5)
1. Production Function TP, MP, and AP (Graph with three stages)
2. TC, VC, FC (Definitions)
3. MC, ATC, AVC, AFC (Formulas and Graph)
4. Long-Run ATC (Graph showing Economies and Diseconomies of Scale)
ii. Perfect Competition (____/5)
1. Characteristics
2. Firm and Industry in Short-Run Making Profit (Graph)
3. Firm and Industry in Short-Run Making Loss (Graph)
4. Firm and Industry in Long-Run equilibrium (Graph)
5. How economic profit and loss disappear in the Long-Run (Graph)
iii. Monopolies (____/5)
1. Characteristics
2. Demand and MR for imperfectly competitive firms (Elastic and Inelastic range)
3. Monopoly making a profit (Graph-label Profit, Consumers Surplus, and DWL)
4. Perfectly Price Discriminating Monopoly (Graph)
5. Regulated Monopolies (Fair Return and Socially Optimal)
iv. Monopolistic Competition (____/5)
1. Characteristics
2. Firm Making Short-Run Profit (Graph)
3. Firm Making Short-Run Loss (Graph)
4. Firm in Long-Run Equilibrium (Graph)
5. How economic profit and loss disappear in the Long-Run (Graph)
v. Oligopolies (____/5)
1. Characteristics
2. Game-Theory Model (Matrix)
3. Kinked Demand Curve (Graph)
4. Profit maximization with Collusion (Graph)
After completing the study guide and then submitting the Problem Set, be sure to SAVE IT (after I
return it to you) to use during AP test review in April/May.
Perfect Competition
Monopolistic Competition
EX:
EX:
No Similarities
EX:
EX:
Oligopoly
Monopoly