Page 618 - Krugmans Economics for AP Text Book_Neat

Module 57 AP Review

Solutions appear at the back of the book.
Check Your Understanding

1. In each of the following situations, what type of market c. Many designers sell high-fashion clothes. Each designer has
structure do you think the industry represents? a distinctive style and a somewhat loyal clientele.
a. There are three producers of aluminum in the world, a good d. A small town in the middle of Alaska has one bicycle shop.
sold in many places.
b. There are thousands of farms that produce
indistinguishable soybeans to thousands of buyers.

Tackle the Test: Multiple-Choice Questions

1. Which of the following is true for a perfectly competitive a. I only
industry? b. II only
I. There are many firms, each with a large market share. c. III only
II. The firms in the industry produce a standardized product. d. I and II only
III. There are barriers to entry and exit. e. I, II, and III
a. I only
4. Which of the following is true for a monopolistically
b. II only
competitive industry?
c. III only
I. There are many firms, each with a small market share.
d. I and II only
II. The firms in the industry produce a standardized
e. I, II, and III
product.
2. Which of the following is true for a monopoly? III. Firms are price-takers.
I. There is only one firm. a. I only
II. The firm produces a product with many close substitutes. b. II only
III. The industry has free entry and exit. c. III only
a. I only d. I and II only
b. II only e. I, II, and III
c. III only
5. Which of the following is an example of differentiated
d. I and II only
products?
e. I, II, and III
a. Coke and Pepsi
3. Which of the following is true for an oligopoly? b. automobiles and bicycles
I. There are a few firms, each with a large market share. c. trucks and gasoline
II. The firms in the industry are interdependent. d. stocks and bonds
III. The industry experiences diseconomies of scale. e. gold and silver

Tackle the Test: Free-Response Questions

1. For each of the following characteristics, indicate which market
c. 1 point: monopoly
structure(s) exhibit that characteristic.
a. many sellers 1 point: oligopoly
b. price-takers
d. 1 point: oligopoly
c. barriers to entry
d. differentiated product 1 point: monopolistic competition

2. a. Draw a correctly labeled graph of a perfectly competitive
Answer (7 points)
firm’s demand curve if the market price is $10.
a. 1 point: perfect competition b. What does the firm’s marginal revenue equal any time it sells
one more unit of its output?
1 point: monopolistic competition
b. 1 point: perfect competition

576 section 10 Behind the Supply Curve: Profit, Production, and Costs