ECON 1002 MICROECONOMICS FINAL EXAM
3 PRACTICE QUESTIONS WITH DETAILED
SOLUTIONS 2026
◉ Oligopoly. Answer: A market structure in which a few large firms
dominate a market
- Few firms in market
- Standardized or differentiated products
- Limited control over price by mutual inter-dependence;
considerable with collusion
- Significant obstacles for entry
- Typically a great deal for nonprice competition, particularly with
product differentiation
- Examples: Steel, Auto, Farm Implements
◉ Pure Monopoly. Answer: A market structure in which one firm
sells a unique product, into which entry is blocked, in which the
single firm has considerable control over product price, and in which
nonprice competition may or may not be found.
- One firm in market
- Unique products; no close substitutes
,- Considerable control over price
- Blocked entry
- Mostly public relations advertising for nonprice competition
- Examples: Local Utilities
◉ Which would best describe perfect competition?
A) One seller, selling a unique product with considerable control
over prices.
B) Many sellers, selling differentiated products, with minimal
control over prices.
C) A large number of sellers, selling standardized products that are
easily substitutable, with zero control over prices.
D) A few sellers, selling a standardized or differentiated product,
with limited control over prices.. Answer: C) A large number of
sellers, selling standardized products that are easily substitutable,
with zero control over prices.
◉ Purely Competitive Demand. Answer: - Perfectly elastic demand
- Firm produces as much or little as they wish at the market price
,- Demand graphs as horizontal line
◉ A demand curve in a perfectly competitive market is
A) perfectly elastic.
B) perfectly inelastic.
C) more elastic.
D) more inelastic.. Answer: A) perfectly elastic.
◉ Demand curve is perfectly elastic. Answer: D=AR=MR=P
◉ In a perfectly competitive market,
A) prices = MC
B) prices = ATC
C) prices = MR
, D) prices = economic profit.. Answer: C) prices = MR
◉ Average Revenue Formula. Answer: - Revenue per Unit
- AR=TR/Q=P
◉ Total Revenue Formula. Answer: - TR=P*Q
◉ Marginal Revenue Formula. Answer: - Extra revenue from 1 more
unit
- MR=Change in TR/ Change in Q
◉ Profit Maximization: TR-TC Approach. Answer: - The competitive
producer will wish to produce at the output level where total
revenue exceeds total cost by the greatest amount
- Break-even point
- Economic profit = TR-TC
- Breakeven point - Economic profits are 0
- Normal Profit
◉ Normal Profit. Answer: the payment made by a firm to obtain and
retain entrepreneurial ability; the minimum income entrepreneurial
3 PRACTICE QUESTIONS WITH DETAILED
SOLUTIONS 2026
◉ Oligopoly. Answer: A market structure in which a few large firms
dominate a market
- Few firms in market
- Standardized or differentiated products
- Limited control over price by mutual inter-dependence;
considerable with collusion
- Significant obstacles for entry
- Typically a great deal for nonprice competition, particularly with
product differentiation
- Examples: Steel, Auto, Farm Implements
◉ Pure Monopoly. Answer: A market structure in which one firm
sells a unique product, into which entry is blocked, in which the
single firm has considerable control over product price, and in which
nonprice competition may or may not be found.
- One firm in market
- Unique products; no close substitutes
,- Considerable control over price
- Blocked entry
- Mostly public relations advertising for nonprice competition
- Examples: Local Utilities
◉ Which would best describe perfect competition?
A) One seller, selling a unique product with considerable control
over prices.
B) Many sellers, selling differentiated products, with minimal
control over prices.
C) A large number of sellers, selling standardized products that are
easily substitutable, with zero control over prices.
D) A few sellers, selling a standardized or differentiated product,
with limited control over prices.. Answer: C) A large number of
sellers, selling standardized products that are easily substitutable,
with zero control over prices.
◉ Purely Competitive Demand. Answer: - Perfectly elastic demand
- Firm produces as much or little as they wish at the market price
,- Demand graphs as horizontal line
◉ A demand curve in a perfectly competitive market is
A) perfectly elastic.
B) perfectly inelastic.
C) more elastic.
D) more inelastic.. Answer: A) perfectly elastic.
◉ Demand curve is perfectly elastic. Answer: D=AR=MR=P
◉ In a perfectly competitive market,
A) prices = MC
B) prices = ATC
C) prices = MR
, D) prices = economic profit.. Answer: C) prices = MR
◉ Average Revenue Formula. Answer: - Revenue per Unit
- AR=TR/Q=P
◉ Total Revenue Formula. Answer: - TR=P*Q
◉ Marginal Revenue Formula. Answer: - Extra revenue from 1 more
unit
- MR=Change in TR/ Change in Q
◉ Profit Maximization: TR-TC Approach. Answer: - The competitive
producer will wish to produce at the output level where total
revenue exceeds total cost by the greatest amount
- Break-even point
- Economic profit = TR-TC
- Breakeven point - Economic profits are 0
- Normal Profit
◉ Normal Profit. Answer: the payment made by a firm to obtain and
retain entrepreneurial ability; the minimum income entrepreneurial
