AP MICROECONOMICS UNIT 4
COMPREHENSIVE EXAMINATION TEST
2026 FULL QUESTIONS AND CORRECT
ANSWERS
◉What are the three conditions necessary for a firm to price
discriminate? Answer: The firm must not be a price taker, must be
able to segregate the market, and must prevent resale of the product
◉What happens to consumer surplus and deadweight loss if a
monopoly practices perfect price discrimination? Answer: Both
consumer surplus and deadweight loss are eliminated
◉Why is a perfectly price-discriminating monopoly considered
allocatively efficient? Answer: It generates no deadweight loss
◉What is the primary difference between monopolistic competition
and perfect competition? Answer: Monopolistic competition
features differentiated products rather than identical ones
, ◉What is the nature of the demand curve for a firm in monopolistic
competition? Answer: It is downward-sloping because the firm is a
price maker
◉What happens in the long run if a monopolistically competitive
firm makes a profit in the short run? Answer: New firms enter the
market, causing the demand for the existing firm's product to fall
until zero economic profit is reached
◉What is excess capacity in monopolistic competition? Answer:
When the firm's output is less than the quantity that minimizes
Average Total Cost (ATC)
◉Do firms in monopolistic competition achieve productive or
allocative efficiency in the long run? Answer: No, they achieve
neither
◉How is consumer surplus calculated for a monopoly? Answer:
One-half times quantity times the price difference (1/2 * Q * P)
◉How is deadweight loss calculated for a monopoly? Answer: One-
half times the change in quantity times the change in price (1/2 * ΔQ
* ΔP)
COMPREHENSIVE EXAMINATION TEST
2026 FULL QUESTIONS AND CORRECT
ANSWERS
◉What are the three conditions necessary for a firm to price
discriminate? Answer: The firm must not be a price taker, must be
able to segregate the market, and must prevent resale of the product
◉What happens to consumer surplus and deadweight loss if a
monopoly practices perfect price discrimination? Answer: Both
consumer surplus and deadweight loss are eliminated
◉Why is a perfectly price-discriminating monopoly considered
allocatively efficient? Answer: It generates no deadweight loss
◉What is the primary difference between monopolistic competition
and perfect competition? Answer: Monopolistic competition
features differentiated products rather than identical ones
, ◉What is the nature of the demand curve for a firm in monopolistic
competition? Answer: It is downward-sloping because the firm is a
price maker
◉What happens in the long run if a monopolistically competitive
firm makes a profit in the short run? Answer: New firms enter the
market, causing the demand for the existing firm's product to fall
until zero economic profit is reached
◉What is excess capacity in monopolistic competition? Answer:
When the firm's output is less than the quantity that minimizes
Average Total Cost (ATC)
◉Do firms in monopolistic competition achieve productive or
allocative efficiency in the long run? Answer: No, they achieve
neither
◉How is consumer surplus calculated for a monopoly? Answer:
One-half times quantity times the price difference (1/2 * Q * P)
◉How is deadweight loss calculated for a monopoly? Answer: One-
half times the change in quantity times the change in price (1/2 * ΔQ
* ΔP)
