Unit 4: Imperfect Competition
Micro · Unit 4 · Paper 2

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 30 terms and is the same for everyone, so a teacher can assign “Unit 4, Paper 2” 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 37 min 34 points0/17 attempted
1

Collusion

2

Fair-return price regulation

3

Prisoner's dilemma

4

Where MR = MC applies

5

MR curve of a linear monopolist

6

Excess capacity

7

Payoff matrix

8

Barriers to entry

9

Perfect price discrimination

10

Monopolistic competition vs perfect competition

11

Why a monopoly is allocatively inefficient

12

Long-run equilibrium in monopolistic competition

Short answer 1. Define or explain: Monopoly

3 pts

Short answer 2. Define or explain: Natural monopoly

3 pts

Short answer 3. Define or explain: Dominant strategy

3 pts

Short answer 4. Define or explain: Monopolistic competition

3 pts

Free response

10 pts

LONG FREE-RESPONSE. Vantis Pharmaceuticals holds a patent and is the sole seller of a medication. Market demand is P = 120 − 2Q, and the firm’s marginal cost and average total cost are both constant at $40 per unit.

Draw a correctly labeled graph showing the demand, marginal revenue, and marginal cost curves for Vantis.

Calculate the profit-maximizing quantity and price, showing your work.

Calculate the firm’s economic profit.

Calculate consumer surplus at the monopoly price.

Identify the allocatively efficient quantity and explain why the monopoly outcome is not allocatively efficient.

Calculate the deadweight loss and shade it on your graph.

Suppose a regulator imposes a price ceiling of $40 per unit. Explain the effect on quantity, on economic profit, and on deadweight loss.