Two practice questions are below. Answer on the page: each one is marked the moment you pick, the correct option is shown whether or not you found it, and the full explanation opens either way.
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Imperfect Competition: two questions to try now
Real questions, the answer key from the mark scheme, and the explanation that goes with it. No account needed to answer them.
Cross-board concept practice · originally a CIE 9708 question, used here because the concept is the same. It is not AP Economics past-paper material.
Question 1
The diagram shows a firm in imperfect competition. It changed its aim from profit maximising to sales revenue maximising. Which type of profit was it making in each case?
Answer: D.
Compare average revenue with average cost at each of the two outputs. Profit maximisation is where marginal revenue equals marginal cost. Sales revenue maximisation is where marginal revenue is zero, which lies further to the right, because the firm keeps expanding for as long as an extra sale adds anything at all to revenue. The diagram shows the average revenue curve still above the average cost curve at that larger output, so the firm more than covers its costs including normal profit and earns supernormal profit at BOTH objectives, which is D. A and B each place one of the two positions at normal profit or worse, which would need average revenue to have fallen to or below average cost, and it has not. C makes that mistake for the revenue-maximising output alone. What genuinely changes between the two positions is the SIZE of the supernormal profit, which is smaller once revenue rather than profit is the target.
Cross-board concept practice · originally a CIE 9708 question, used here because the concept is the same. It is not AP Economics past-paper material.
Question 2
For a firm in imperfect competition, the marginal revenue product of labour at any given level of employment is equal to
Answer: C.
The marginal revenue product of labour is what one more worker adds to the firm's revenue, and that has two stages: the worker produces extra output, which is the marginal physical product, and that output is sold for extra revenue, which is marginal revenue. Multiplying the two gives the answer. The word imperfect in the stem matters, because a firm with a downward sloping demand curve must lower its price to sell the extra units, so marginal revenue lies below price and marginal revenue product falls for two reasons at once, diminishing physical returns and a falling marginal revenue. Multiplying marginal physical product by the wage rate mixes a demand-side schedule with a cost, and the wage is what the curve gets compared against when deciding how many to hire, not part of the curve itself. Dividing marginal revenue by the number employed produces an average of sorts but not a marginal magnitude, and dividing marginal revenue by the wage rate compares revenue with cost, which is a profitability ratio rather than a product.
These questions are drawn from past Cambridge papers, mapped across to this topic because the concept is the same. You answer, you find out immediately whether you were right, and you get the reasoning for the correct option and for each distractor. Wrong answers go to a mistakes locker so you can come back to exactly those.
Practice is free. You need an account only so your progress and your mistakes are still there next time.
These are the errors that cost marks on imperfect competition, taken from our own topic notes. Read them before you practise and you will recognise the traps in the questions.
Drawing MR on top of, or above, the demand curve.
Reading the monopoly price off the MR curve instead of up to demand.
Assuming a monopoly must earn a profit.
Putting the monopoly's output on the inelastic portion of demand.
Claiming monopolistic competition earns long-run economic profit, entry removes it.
Forgetting excess capacity in monopolistic competition.
Drawing long-run monopolistic competition with demand crossing ATC rather than tangent to it.
Saying price discrimination always harms consumers, total output actually rises.
