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Summary AP Microeconomics Unit 4 exam 2024
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AP Microeconomics Unit 4 exam 2024
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AP Microeconomics Unit 4 exam 20245 Characteristics of a Monopoly - 1) Single Seller
2) Unique good with no close substitute
3) "Price Maker"
4) High Barriers to Entry
5) Some "Nonprice" Competition
Single Seller (1) - -one firm controls the vast majority of a market
-firm=industry
"Price Maker" (3) - -firm can manipulate price by changing the quantity produced
(ie. shifting supply to the left)
High Barriers to Entry (4) - -new firms CANNOT enter market
-no immediate competitors
-firms can make profit in the long-run
Some "Nonprice" Competition (5) - -monopolies still advertise their products in an
effort to increase demand
Four Origins of Monopolies (Barriers to Entry) - 1) Geography
, AP Microeconomics Unit 4 exam 2024
2) Government
3) Technology or Common Use
4)Mass Production and Low Costs
Main difference between Monopolies and Perfect Competition - MARGINAL
REVENUE DOES NOT EQUAL PRICE (MR LESS THAN PRICE)
-monopolies (and all imperfectly competitive firms) have downward sloping
demand curve
How does a firm sell more in a monopoly? - A firm must lower its price
Total Revenue Test - If price falls and TR increases, then demand is elastic;
If price falls and TR falls, then demand is inelastic
(A monopoly will only produce in the elastic range)
Where do monopolists produce? - Where MR=MC, but it charges the price
consumers are willing to pay identified by the demand curve
Are monopolies efficient? - No, monopolies under-produce and overcharge
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