AP Micro Unit 4 Review: Imperfect Competition
AP Micro Unit 4 covers monopoly, price discrimination, monopolistic competition, oligopoly, and game theory. Worth 15–22% of the exam, it is where the monopoly graph and the payoff matrix live, two of the most common FRQ setups.
What's in Unit 4
- 14.1 Introduction to Imperfectly Competitive Markets
- 24.2 Monopoly
- 34.3 Price Discrimination
- 44.4 Monopolistic Competition
- 54.5 Oligopoly and Game Theory
Watch the video lessons
- AP Micro 4.1 · 8 min videoImperfect Competition: Monopoly, Oligopoly, Monopolistic Competition
- AP Micro 4.2A · 10 min videoMonopoly Graph: Marginal Revenue, Profit and Deadweight Loss
- AP Micro 4.2B · 10 min videoNatural Monopoly and Price Regulation: P = MC vs P = ATC
- AP Micro 4.3 · 9 min videoPrice Discrimination and Perfect Price Discrimination
- AP Micro 4.4 · 10 min videoMonopolistic Competition: Long-Run Equilibrium and Excess Capacity
- AP Micro 4.5A · 10 min videoGame Theory: Payoff Matrix, Dominant Strategy and Nash Equilibrium
- AP Micro 4.5B · 11 min videoPrisoner's Dilemma, Collusion and Tit for Tat
Study this unit free on EconLearn
Single-firm markets, MR below price, and deadweight loss.
Full lesson, practice questions & flashcards →Product differentiation, short-run profits, and long-run zero-profit.
Full lesson, practice questions & flashcards →Game theory, Nash equilibrium, cartels, and strategic behavior.
Full lesson, practice questions & flashcards →Teaching this unit? Ready-made lessons: Market Structures Bell Ringer, Market Structures Comparison Lesson Plan and Market Structures Substitute Lesson Plan
What to master for the exam
- Draw the monopoly graph: produce where MR = MC, price off the demand curve, shade deadweight loss.
- Read payoff matrices: find each player's dominant strategy (if any) and the Nash equilibrium.
- Know the monopolistic competition long-run tangency (zero profit, excess capacity, P > MC).
- Compare all four market structures on efficiency: only perfect competition delivers P = MC.
AP Micro Unit 4: common questions
What is on AP Micro Unit 4?
Monopoly (including the graph, deadweight loss, price discrimination, and regulation), monopolistic competition in the short and long run, and oligopoly with game theory, payoff matrices, dominant strategies, and Nash equilibrium. It is worth 15–22% of the AP Micro exam.
How do you find a Nash equilibrium in a payoff matrix?
For each player, hold the other player's choice fixed and pick the best response; mark it. A cell where both players' choices are best responses to each other is a Nash equilibrium, neither player can gain by changing strategy alone. Check all four cells; some games have one, some have multiple, and some have none in pure strategies.
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