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
- 1Introduction to imperfectly competitive markets
- 2Monopoly (graph, deadweight loss, and regulation)
- 3Price discrimination
- 4Monopolistic competition in the short and long run
- 5Oligopoly and game theory (payoff matrices, dominant strategies, Nash equilibrium)
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 →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.