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AP Microeconomics 4.2 Monopoly Questions

Analyze monopoly equilibrium with demand, marginal revenue, marginal cost, and ATC, then evaluate price, profit, surplus, and inefficiency.

Syllabus
Effective Fall 2022
Course
AP Microeconomics

Exam points

  • identify monopoly barriers and natural-monopoly scale economies across the range of demand
  • use demand, MR, MC and ATC to find monopoly quantity, price and economic profit or loss
  • connect MR signs to demand elasticity, total revenue and the monopolist's output adjustment
  • calculate consumer surplus, producer surplus and total surplus from monopoly graphs or data
  • compare monopoly with competition and calculate inefficiency between MR = MC and P = MC outputs

Covered syllabus points

PRD-3.B—b. Explain (using graphs where appropriate) equilibrium, firm decision making, consumer surplus, producer surplus, profit (loss),…

Question 1

[Maximum number: 5]

Voda Reservoir is a profit-maximizing firm and the only producer of bottled water in a country.

Currently, Voda Reservoir is earning negative economic profit.

Question (a)

(a)

Draw a correctly labeled graph for Voda Reservoir and show each of the following.

[ 5 ]

Question (i)

(i)

The profit-maximizing quantity, labeled QM\mathrm{Q}_{\mathrm{M}}

[ 2 ]

Question (ii)

(ii)

The profit-maximizing price, labeled PM\mathrm{P}_{\mathrm{M}}

[ 1 ]

Question (iii)

(iii)

The average total cost curve consistent with Voda Reservoir earning negative economic profit, labeled ATC

[ 1 ]

Question (iv)

(iv)

The area of deadweight loss, shaded completely

[ 1 ]
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