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AP Microeconomics Practice Quiz: Introduction to Imperfectly Competitive Markets

Written by AP Content Team, Verified for 2026 AP Exams, Last updated: May 2026

Test your understanding with short quizzes. This quiz has 11 questions to check your progress.

Question 1 of 11

Which of the following lists includes only types of imperfectly competitive product markets mentioned in the text?

All Questions (11)

Which of the following lists includes only types of imperfectly competitive product markets mentioned in the text?

A) Monopoly, Oligopoly, and Monopolistic Competition

B) Perfect Competition, Monopoly, and Monopsony

C) Oligopoly, Monopsony, and Perfect Competition

D) Monopolistic Competition, Pure Competition, and Monopoly

Correct Answer: A

The provided content explicitly states that 'Imperfectly competitive markets include monopoly, oligopoly, and monopolistic competition in product markets'. Monopsony is in a factor market, and perfect/pure competition is the opposite of imperfect competition.

For a firm operating in an imperfectly competitive output market, what is the relationship between price and the quantity of units sold, assuming all else is constant?

A) To sell more units, the firm must raise its price.

B) To sell more units, the firm must lower its price.

C) The firm can sell any number of units at the existing market price.

D) Price and the number of units sold are unrelated.

Correct Answer: B

The content specifies that 'In imperfectly competitive output markets and assuming all else is constant, a firm must lower price to sell additional units.' This implies a downward-sloping demand curve for the firm.

Which of the following conditions is a key indicator of inefficiency in an imperfectly competitive market?

A) Price is equal to marginal cost.

B) Price is less than marginal cost.

C) Price is greater than marginal cost.

D) Firms earn zero economic profit.

Correct Answer: C

The text defines inefficiency in these markets by stating that 'consumers and producers respond to prices that are above the marginal costs of production (i.e., price is greater than marginal cost in an inefficient market).'

According to the text, factors such as high start-up costs and exclusive ownership of key resources are known as what?

A) Market incentives

B) Competitive advantages

C) Barriers to entry

D) Price discrimination techniques

Correct Answer: C

The content explicitly identifies 'high fixed/start-up costs... and exclusive ownership of key resources' as examples of 'Barriers to entry' that can sustain imperfectly competitive market structures.

A government grants a patent to a pharmaceutical company, giving it the sole right to produce a new medication. This action serves to create which of the following?

A) A perfectly competitive market through government intervention.

B) A legal barrier to entry that can sustain an imperfectly competitive market.

C) A situation where the firm must accept the market price for its medication.

D) An incentive for other firms to immediately enter the market.

Correct Answer: B

The text lists 'legal barriers to entry' as a type of barrier that sustains imperfectly competitive markets. A patent is a form of legal barrier, which mitigates the incentive for other firms to enter.

The market structure of monopsony is an example of an imperfectly competitive market in which specific area?

A) International trade markets

B) Product markets

C) Financial markets

D) Factor markets

Correct Answer: D

The provided text clearly distinguishes different market types, stating that imperfectly competitive markets include 'monopsony in factor markets.'

How do barriers to entry, such as high fixed costs, affect the long-term structure of a market?

A) They ensure the market remains efficient with price equal to marginal cost.

B) They encourage a large number of new firms to enter, increasing competition.

C) They mitigate incentives for new firms to enter, which can sustain an imperfectly competitive structure.

D) They force existing firms to lower their prices to match marginal cost.

Correct Answer: C

The content explains this relationship directly: 'Incentives to enter an industry may be mitigated by barriers to entry. Barriers to entry... can sustain imperfectly competitive market structures.'

The fact that consumers and producers in imperfectly competitive markets respond to prices greater than marginal cost leads to which outcome?

A) A market that is efficient and maximizes total surplus.

B) A market where the marginal benefit of consumption equals the marginal cost of production.

C) A market that is inefficient.

D) A market with no barriers to entry or exit.

Correct Answer: C

The text links the condition of price being greater than marginal cost directly to inefficiency, stating that this occurs 'in an inefficient market.' This mismatch between price (a signal of marginal benefit to consumers) and marginal cost leads to an inefficient allocation of resources.

Which of the following is NOT an example of a barrier to entry as described in the provided text?

A) A firm's exclusive ownership of a necessary natural resource.

B) A government-issued patent for a new invention.

C) Extremely high start-up costs for a new factory.

D) A firm lowering its price to sell an additional unit.

Correct Answer: D

The text lists 'high fixed/start-up costs, legal barriers to entry, and exclusive ownership of key resources' as barriers to entry. A firm lowering its price to sell more is a characteristic of operating within an imperfectly competitive market, not a barrier that prevents other firms from entering.

A single firm controls the entire supply of a specific raw material, a key resource for an industry. This situation is likely to result in a market characterized by:

A) Easy entry for new firms and a price equal to marginal cost.

B) A sustained imperfectly competitive structure where the firm must lower its price to increase sales.

C) A perfectly competitive structure where the firm is a price taker.

D) An efficient outcome where consumer and producer surplus are maximized.

Correct Answer: B

This scenario combines two core concepts. The 'exclusive ownership of key resources' is a barrier to entry that 'can sustain imperfectly competitive market structures.' A firm in such a market 'must lower price to sell additional units.'

The downward-sloping demand curve faced by a firm in an imperfectly competitive market implies that:

A) the firm has market power and must reduce its price to sell more.

B) the market is efficient because price equals marginal revenue.

C) there are no barriers to entry in the market.

D) the firm can sell an infinite amount of output at the market price.

Correct Answer: A

The text states that in these markets, 'a firm must lower price to sell additional units.' This is the definition of a downward-sloping demand curve and indicates the firm has some control over its price (market power), unlike a perfectly competitive firm that faces a horizontal demand curve.