AP Microeconomics Unit 4 Practice Test

Last Updated on June 8, 2026

AP Microeconomics Unit 4 Practice Test 2026 Questions and Answers. In the two previous chapters, we reviewed the “bookends” of market structures: perfect competition and monopoly. Now we will look at the two other imperfectly competitive markets: monopolistic competition and oligopoly. Monopolistic competition has many more firms than oligopoly, but oligopolies dominate in terms of market share, assets, and price control.

Firms that are monopolistically competitive have characteristics of both a monopoly and perfect competition. They are monopolies in the sense that they sell their own product, which is slightly differentiated from competitors.

Consider your favorite fast-food joint: its burgers and other items are marginally different from those of its competitors, so, in this sense, it has some monopoly power. For example, McDonald’s burgers are slightly different from Wendy’s. However, there are also many competitors due to easy entry and exit, and in this sense, it’s a very competitive market—hence the name “monopolistic competition.”

AP Microeconomics Unit 4 Practice Test

AP Microeconomics Practice Test
Unit 4: Imperfect Competition
Total Items: MCQ 19
Time Limit: N/A

1) See the figure below to answer questions. The game theory matrix below shows the daily profits for both Firm A and Firm B. Firm A’s profits are underlined, and Firm B’s are circled.

Given the data in the game theory matrix, what are both firms’ dominant pricing strategies?

2)

If this is a perfectly competitive market, the consumer surplus would be area

3)

The unregulated monopolist’s price would be

4) Which of the following is a characteristic of monopolistic competition?

5) Which of the following is a characteristic of monopolistic competition?

MR = MC profit-maximizing criterion for monopolistic competition and oligopoly
P > MC relationship between price (P) and marginal cost (MC) for both monopolistic competition and oligopoly
P > ATC relationship between P and ATC for both monopolistic competition and oligopoly

6) If a lump-sum tax is imposed on a monopolistically competitive firm, which of the following will happen to the price and quantity sold in the market?

7)

Given the data in the game theory matrix, if both firms know all of the information in the matrix and cooperate in their pricing, what will each firm choose?

8) Which of the following is true of oligopolies?

I. They make strategic decisions considering competitors’ actions.
II. There are low barriers to entry.
III. They are neither allocatively nor productively efficient.
IV. They are “price takers” in the market.

9)

The “fair-return” price of the regulated monopolist would be

10) In game theory, this is the best choice for one player regardless of what the other player chooses.

11)

The socially optimal price would be

12)

After the unregulated, profit-maximizing monopolist takes over, the consumer surplus is

13) In this market structure, short-run profits attract new competition, causing the demand curve to shift to the left and decrease for existing firms in the market, resulting in zero economic profit in the long-run equilibrium

14) If a monopoly increases production in the elastic region of the demand curve, which of the following is true?

15) Which of the following are true about profit-maximizing monopolies?

I. They produce on the inelastic portion of their demand curves.
II. Marginal revenue is less than demand.
III. They are “price takers.”
IV. Price is greater than minimum ATC.

 

16)

The total profits for this monopolist are identified by

17) Which of the following is true of a natural monopoly?

18) Which of the following is not a characteristic of oligopolies?

19)

The total costs for the monopolist are identified by

Your score is

See also: