Unit 4: Imperfect Competition
Micro · Unit 4 · Paper 1

Imperfect Competition unit test

A test on this unit alone, marked as a percentage and a letter grade — for the test your class is actually sitting, rather than for May. Answer everything, then submit once: seeing the answer to question 3 before attempting question 4 makes the final percentage meaningless.

Paper 1Paper 2Paper 3
Each paper is built from this unit’s 48 terms and is the same for everyone, so a teacher can assign “Unit 4, Paper 1” and every student sits the identical test. Multiple choice is marked objectively; the written sections you mark yourself against the model answer and rubric.
Suggested time 34 min 31 points0/17 attempted
1

Why monopoly fails both efficiencies

2

Barriers to entry

3

Why MR lies below demand for a monopolist

4

Natural monopoly geometry

5

MR and elasticity

6

Where the deadweight loss triangle sits

7

Game theory in oligopoly

8

Perfect price discrimination is efficient

9

Concentration ratio

10

Two real arguments for monopoly

11

Monopoly in the long run

12

Monopolistic competition vs perfect competition

Short answer 1. Define or explain: Monopolistic competition

3 pts

Short answer 2. Define or explain: The two regulated prices

3 pts

Short answer 3. Define or explain: MR curve of a linear monopolist

3 pts

Short answer 4. Define or explain: Monopoly output and price

3 pts

Free response

7 pts

Two firms, Nordis and Sarveq, simultaneously choose whether to Advertise or Not Advertise. Payoffs in millions of dollars are given as (Nordis, Sarveq): both Advertise (4, 4); Nordis Advertises and Sarveq does not (10, 2); Sarveq Advertises and Nordis does not (2, 10); neither Advertises (7, 7). (a) Determine whether each firm has a dominant strategy, showing your reasoning for each firm separately. (b) Identify the Nash equilibrium and explain why it is stable. (c) Explain why the Nash equilibrium is not the outcome that maximizes joint payoffs, and name the structure this game illustrates. (d) Explain one change to the situation that could allow the firms to reach the jointly better outcome, and explain why it works.

Determine whether each firm has a dominant strategy, with reasoning for each.

Identify the Nash equilibrium and explain why it is stable.

Explain why it does not maximize joint payoffs and name the structure.

Explain one change that could achieve the jointly better outcome and why it works.