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AP Microeconomics Monopolistic Competition and Oligopoly — practice questions

Explore 21 free Monopolistic Competition and Oligopoly questions in AP Microeconomics Economics. Open each question or exercise to read its content, reference answers and available explanation.

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Monopolistic Competition and Oligopoly questions and exercises with answers

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Perfect competition and monopoly sit at opposite ends of the:Read the answer and worked solution →Products that are distinctive from their rivals in some way are called:Read the answer and worked solution →Alongside monopolistic competition, the other imperfectly competitive market structure is:Read the answer and worked solution →A group of firms with a formal agreement to collude and act as a monopoly is called a:Read the answer and worked solution →An oligopoly with exactly two dominant firms is also called a:Read the answer and worked solution →The scenario where the gains from cooperating exceed the rewards from pursuing self-interest is the:Read the answer and worked solution →The curve on which competing oligopoly firms match price cuts but not price increases is the:Read the answer and worked solution →Analysing oligopoly pricing means weighing the pros and cons of competition against:Read the answer and worked solution →The barrier to entry behind the Boeing and Airbus oligopoly comes from economies of scale combined with:Read the answer and worked solution →A cartel agreement aims to produce which level of output?Read the answer and worked solution →Products can be differentiated by physical features, location, intangible qualities and:Read the answer and worked solution →A cartel is unstable because each member firm has an incentive to:Read the answer and worked solution →The kinked demand curve makes an oligopolist reluctant to raise price because rivals will:Read the answer and worked solution →Monopolistic competition and oligopoly are grouped together because both are:Read the answer and worked solution →The prisoner's dilemma applies to oligopoly because firms face a choice between:Read the answer and worked solution →Compared with a cartel, the Boeing and Airbus duopoly is held together by:Read the answer and worked solution →Stop on the market structureRead the answer and worked solution →Match each oligopoly termRead the answer and worked solution →Perfect competition or oligopoly?Read the answer and worked solution →True or false: imperfect competitionRead the answer and worked solution →Complete the oligopoly rulesRead the answer and worked solution →

Worked practice questions

Perfect competition and monopoly sit at opposite ends of the:

  1. Competition spectrum
  2. Demand schedule
  3. Production frontier
  4. Marginal cost curve
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Correct answer: A. Competition spectrum

1. Market structures are arranged by how much competition they involve. 2. Perfect competition and monopoly are at opposite ends of the competition spectrum. 3. Monopolistic competition and oligopoly sit between those two extremes. 4. The spectrum is about market structure rather than about cost or demand. _Source: OpenStax Principles of Microeconomics for AP(R) Courses 2e (CC BY 4.0), Ch 10 'Monopolistic Competition and Oligopoly', sections 10.1-10.2_

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Products that are distinctive from their rivals in some way are called:

  1. Public sector goods
  2. Differentiated goods
  3. Fully identical goods
  4. Purely inferior goods
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Correct answer: B. Differentiated goods

1. Monopolistic competition rests on products not being identical. 2. Products can be distinguished by physical features, location, intangible qualities or perception. 3. We call products that are distinctive in one of these ways differentiated products. 4. Perfect competition instead assumes every seller's product is identical. _Source: OpenStax Principles of Microeconomics for AP(R) Courses 2e (CC BY 4.0), Ch 10 'Monopolistic Competition and Oligopoly', sections 10.1-10.2_

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Alongside monopolistic competition, the other imperfectly competitive market structure is:

  1. Perfect competition
  2. Barter exchange
  3. Called oligopoly
  4. Pure monopoly
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Correct answer: C. Called oligopoly

1. Imperfect competition covers the middle of the spectrum. 2. One type of imperfectly competitive market is monopolistic competition. 3. The other type of imperfectly competitive market is oligopoly. 4. Perfect competition and pure monopoly are the two extremes rather than the middle. _Source: OpenStax Principles of Microeconomics for AP(R) Courses 2e (CC BY 4.0), Ch 10 'Monopolistic Competition and Oligopoly', sections 10.1-10.2_

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