AP Microeconomics 4.4 Monopolistic Competition Questions

Review how differentiated firms choose output and price, how entry removes long-run profit, and why excess capacity and price above marginal cost remain.

Exam points

identify monopolistic competition from differentiated products, many firms and low entry and exit barriers
use downward-sloping demand, MR, MC and ATC to find short-run output, price and profit or loss
explain how differentiation and advertising affect a firm's market power and demand elasticity
trace entry or exit through demand changes until firms earn zero economic profit in the long run
apply long-run conditions MR = MC, P = ATC and P greater than MC on a tangent graph

Covered syllabus points

PRD-3.B—b. Explain (using graphs where appropriate) equilibrium, firm decision making, consumer surplus, producer surplus,…—Topic 4.4

[Maximum number: 1]

The table below shows the total cost and total benefit of advertisements placed by AZY Foods, a firm in the retail food market.

Table for Question 1 — AP Microeconomics

There are many firms in the retail food market. Each firm places its own firm-specific advertisements without considering the actions of its competitors. In what market structure is AZY Foods operating?

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Covered syllabus points

Question 1