ECN 212 FINAL EXAM 2026 ACTUAL QUESTIONS AND
ANSWERS GRADED A+
✔✔welfare of monopolies: The monopoly's profit: a social cost? - ✔✔- monopoly -
higher profit
- not a reduction of economic welfare
- bigger producer surplus
- smaller consumer surplus
- not a social problem
- social loss = dead weight loss
- from the inefficiently low quantity of output
✔✔price discrimination - ✔✔- sell the same good at different prices to different
customers
- rational strategy to increase profit
- requires the ability to separate customers according to their willingness to pay
- can raise economic welfare
✔✔Perfect price discrimination - ✔✔- charge each customer a different price
- exactly his or her willingness to pay
- monopoly firm gets the entire surplus (profit)
-no deadweight loss
✔✔Without price discrimination - ✔✔Single price > MC
Consumer surplus
Producer surplus (Profit)
Deadweight loss
✔✔Monopolistic competition - ✔✔many firms selling products that are similar but not
identical
- each firm has a monopoly over the product it makes, but many other firms make
similar products that compete for the same consumer
✔✔product differentiation - ✔✔- not price takers
- downward sloping demand curve
✔✔free entry and exit - ✔✔zero economic profit in the long run
✔✔In the short run, profit maximization - ✔✔- produce the quantity where marginal
revenue = marginal cost
- price: on the demand curve
- If P > ATC: profit
- If P < ATC: loss
- similar to monopoly
, ✔✔if firms are making profit in short run - ✔✔- new firms - incentive to enter the market
- increase number of products
-reduces demand faced by each firm
- demand curve shifts left
- each firm's profit declines until: zero economic profit
✔✔Zero economic profit - ✔✔- demand curve
- tangent to average total cost curve
- at quantity where marginal revenue = marginal cost
- price = average total cost
- price exceeds marginal cost
✔✔Monopolistic versus perfect competition - ✔✔- monopolistic competition
- Quantity: not at minimum ATC (excess capacity)
- P >MC, markup over marginal cost
- perfect competition
- quantity: at min ATC (efficient scale)
- P = MC
✔✔Incentive to advertise - ✔✔- when firms sell differentiated products and charge
prices above marginal cost
- advertise to attract more buyers
✔✔advertising spending - ✔✔- highly differentiated goods: 10% - 20% of revenue
- industrial products: little advertising
- homogenous products: advertising
✔✔Oligopoly - ✔✔- only a few sellers
- offer similar or identical products
- interdependent
✔✔Game theory - ✔✔- how people behave in strategic situations
- choose among alternative courses of action
- must consider how others might respond tp the action he takes
✔✔A small group of sellers, oligopolists - ✔✔- tension between cooperation and self-
interest
- best off cooperating acting like a monopolist
- produce a small quantity of output
- charge P >MC
- Each firm cares only about its own profit
- powerful incentives not to cooperate
✔✔Nash equilibrium - ✔✔- economic actors interacting with one another
- each choose their best strategy
ANSWERS GRADED A+
✔✔welfare of monopolies: The monopoly's profit: a social cost? - ✔✔- monopoly -
higher profit
- not a reduction of economic welfare
- bigger producer surplus
- smaller consumer surplus
- not a social problem
- social loss = dead weight loss
- from the inefficiently low quantity of output
✔✔price discrimination - ✔✔- sell the same good at different prices to different
customers
- rational strategy to increase profit
- requires the ability to separate customers according to their willingness to pay
- can raise economic welfare
✔✔Perfect price discrimination - ✔✔- charge each customer a different price
- exactly his or her willingness to pay
- monopoly firm gets the entire surplus (profit)
-no deadweight loss
✔✔Without price discrimination - ✔✔Single price > MC
Consumer surplus
Producer surplus (Profit)
Deadweight loss
✔✔Monopolistic competition - ✔✔many firms selling products that are similar but not
identical
- each firm has a monopoly over the product it makes, but many other firms make
similar products that compete for the same consumer
✔✔product differentiation - ✔✔- not price takers
- downward sloping demand curve
✔✔free entry and exit - ✔✔zero economic profit in the long run
✔✔In the short run, profit maximization - ✔✔- produce the quantity where marginal
revenue = marginal cost
- price: on the demand curve
- If P > ATC: profit
- If P < ATC: loss
- similar to monopoly
, ✔✔if firms are making profit in short run - ✔✔- new firms - incentive to enter the market
- increase number of products
-reduces demand faced by each firm
- demand curve shifts left
- each firm's profit declines until: zero economic profit
✔✔Zero economic profit - ✔✔- demand curve
- tangent to average total cost curve
- at quantity where marginal revenue = marginal cost
- price = average total cost
- price exceeds marginal cost
✔✔Monopolistic versus perfect competition - ✔✔- monopolistic competition
- Quantity: not at minimum ATC (excess capacity)
- P >MC, markup over marginal cost
- perfect competition
- quantity: at min ATC (efficient scale)
- P = MC
✔✔Incentive to advertise - ✔✔- when firms sell differentiated products and charge
prices above marginal cost
- advertise to attract more buyers
✔✔advertising spending - ✔✔- highly differentiated goods: 10% - 20% of revenue
- industrial products: little advertising
- homogenous products: advertising
✔✔Oligopoly - ✔✔- only a few sellers
- offer similar or identical products
- interdependent
✔✔Game theory - ✔✔- how people behave in strategic situations
- choose among alternative courses of action
- must consider how others might respond tp the action he takes
✔✔A small group of sellers, oligopolists - ✔✔- tension between cooperation and self-
interest
- best off cooperating acting like a monopolist
- produce a small quantity of output
- charge P >MC
- Each firm cares only about its own profit
- powerful incentives not to cooperate
✔✔Nash equilibrium - ✔✔- economic actors interacting with one another
- each choose their best strategy
