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1. The AR curve and industry demand curve are same
(a) in case of monopoly
(b) in case of oligopoly
(c) in case of perfect competition
(d) None of the above
Ans. a
2. When the TR and STC curves are parallel, it shows the point where the monopolist reaches the
(a) best level of profit only
(b) best level of output
(c) best level of rivals price
(d) All of these
Ans. b
3. A cartel is most likely to occur in
(a) perfect competition as firms compete by reducing cost
(b) oligopoly as firms act together to raise prices to increase profits
(c) monopolistic competition where firms collude to increase profits
(d) oligopoly as firms compete to lower prices and increase their own profits
Ans. b
4. Bilateral monopoly refers to a market situation in which
(a) a single producer (monopolist) of a product faces a single buyer (monapsonist) of that product
(b) there is only one seller in the market
(c) there are two sellers in the market
(d) there are two buyers in the market
Ans. a
6. Which of the following statements is/are not correct?
1. Prices ratio goods among different uses and users.
2. Prices tend to force producers into low cost aperations, especially in competitive industries.
3. Prices tend to force producers into high cost operations, especially in competitive industries.
4. Prices reflect in competitive industries.
(a) 1 and 4
(c) Only 3
(b) Only 2
(d) Only 4
Ans. c
7. A price discriminating
(a) cannot offer discounts
(b) sells a larger quantity than it would if it was a single price monopoly
(c) cannot control the price of its product
(d) makes a smaller economic profit than it would if it was a single price monopoly
Ans. b
8. Pursuing a policy of price discrimination will increase the profits of a monopolist who sells in two sub markets
(a) only if he sells more than one product
(b) if the price elasticity of demand for his output differs in two markets
(c) if buyers in either sub market can easily resale his output to buyers in the other sub market
(d) only during the short-run when capital stock is fixed
Ans. b
9. In monopolistic competition, a firm can earn supernormal profits in the short-run but in the long-run, such profits disappear because
(a) it assumes that entry is free and new firms will enter the industry
(b) it assumes that exit is free and old firms will exit from the industry
(c) it assumes that the market is to be coniverted into monopoly due to cartel
(d) All of the above
Ans. a
10. If a monopolistically competitive seller can convince buyers that sold by rival firms, then his product is of better quality and value than products
(a) demand becomes more inelastic
(b) demand increases
(c) the firm gains more control over its prices
(d) All of the above
Ans. d
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11. Which of the following most closely approximates our definition of oligopoly?
(a) The cigarette industry
(b) The barber shops in a city
(c) The gasoline stations in a city
(d) Wheat farmers in the mid-west
Ans. a
12. In pure monopoly, what is the relation between the price and the marginal revenue?
(a) The price is greater than the marginal revenue
(b) The price is less than the marginal revenue
(c) There is no relation
(d) They are equal
Ans. a
13. According to Hall and Hitch, business firms under oligopoly and monopolistic competitions do not determine prices and output by comparing MC and MR but fix prices on the basis of
(a) full average cost of production
(b) tull fixed cost of production
(c) satistactory margin of profit
(d) None the above
Ans. a
14. Oligopoly describes
(a) a kind of monopolistic competition in which each seller is aware of the influence of his action on the other sellers
(b) an industry engaged in more competition than a monopoly but less than perfect competition
(c) an industry with more than one firm
(d) None of the above
Ans. a
15. In order to maximise profits, a monopoly company will produce that quantity at which the
(a) marginal revenue equals average total cost
(b) price equals marginal revenue
(c) marginal revenue equals marginal cost
(d) total revenue equals total cost
Ans. c
16. Which of the following best defines price discrimination?
(a) Charging different prices on the basis of race
(b) Charging different prices for goods with different costs of production
(c) Charging different prices based on cost-of-service differences
(d) Selling a certain product of given quality and cost per unit different prices to different buyers
Ans. d
17. Monopoly means
(a) a single producer of a particular product in the world
(b) a single producer of a particular product in India
(c) a single producer of a particular product in a particular town or city
(d) a single producer of a particular product in a single market
Ans. d
18. A cartel is
(a) a market structure with a large number of small firms
(b) a group of firms acting together to raise price, decrease output and increase economic profit
(c) another name for an oligopoly (d) a market with only two firms
Ans. b
19. In order to practice price discrimination, which of the following is needed?
(a) Sorne degree of monopoly power
(b) An ability to separate the market
(c) An ability to prevent reselling
(d) All of the above
Ans. d
20. At the best level of output for the pure monopolist,
(a) MR = SMC
(c) P = Lowest SAC
(b) P = SMC
(d) Pis highest
Ans. a
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21. A market in which the products are similar but identical
(a) monopoly
(b) oligopoly
(c) monopsony
(d) monopolistic competition
Ans. d
22. The demand for the product of a monopoly firm is
(a) inelastic
(b) elastic
(c) unitary elastic
(d) impossible to know without knowledge of market demand elasticity of the product
Ans. d
23. Which of the following statement is not true A discriminating monopolist
(a) operates in more than one market
(b) makes more profit because he discriminates
(c) maximises his profit in each market
(d) charges same prices in different markets
Ans. d
25. The equilibrium is unstable and indeterminate under
(a) Edgeworth’s duopoly model
(b) Chamberlin’s oligopoly model
(c) Bertrand’s model
(d) Pareto’s model
Ans. a
26. Which of the following is necessary for a natural monopoly?
(a) Economies of scale
(b) A high proportion of the total cost is the cost of capital goods
(c) The market is very small
(d) All of the above
Ans. d
27. When there is a single buyer of a commodity in the market, it is known as
(a) monopoly
(c) bilateral monopoly
(b) monopsony
(d) None these
Ans. b
28. The hypothesis that the firms seek to maximise their sales revenue owes its origin to
(a) W. J. Baumol
(c) W.J. Hicks
(b) Baumo
(d) J.W. Baumol
Ans. a
29. Each seller determines his price on the assumption that his rival will keep his price constant, under
(a) Bertrand’s model
(c) Edgeworth’s model
(b) Cournot’s duopoly model
(d) Price leadership
Ans. a
30. Which of the following tells us how sellers as a group will behave in a perfectly competitive market?
(a) A market demand curve
(b) A market demand schedule
(c) A market supply schedule
(d) A market supply curve
Ans. d
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31. Price control is one of the monopoly regulations which is most advantageous for
(a) the producer
(c) the government
(b) the consumer
(d) the seller
Ans. b
32. Quantity demanded varies inversely with price in
(a) typical supply curve
(b) giffen demand curve
(c) ordinary supply curve
(d) typical demand schedule
Ans. d
33. Degree monopoly power according to learner is
(a) P/e
(b) P-MC/P
(c) AR -MR/P
(d)MC-P/P
Ans. b
34. If there is a market structure in which there are only two buyers for a commodity, it is called
(a) duopoly
(C) discrimination market
(b) duopsony
(d) None of these
Ans. b
35. What is full cost?
(a) Average direct cost
(c) Normal margin for profit
(d) All of these
(b) Average overhead cost
Ans. d
36. “An oligopolist decreases his price the rivals will follow”. This is the basic assumption of
(a) the kinked supply curve
(b) the oligopolistic demand curve
c) the kinked demand curve
(d) the demand curve
Ans. b
37. Which of the following is the best example of a perfectly competitive market?
(a) Diamonds
(C) Athletic shoes
(b) Farming
(d) Soft drinks
Ans. b
38. “The equilibrium prices of duopoly model are obtained at the intersection of their reaction curves”. It is correct in the case of
(a) Edgeworth’s model
(b) Chamberlin’s model
(c) Bertrand’s duopoly model
(d) None of these
Ans. c
39. Under oligopoly, the price of the product is fixed at point
(a) of kink in the dermand curve
(b) where MC= MR
(c) where, AC= MC
Ans. a
40. Rate of return’ regulation is designed to allow a natural monopoly to
(a) underestimate its average cost
(b) earn zero normal profit
(c) earn a normal profit
(d) earn an economic profit
(d) where, AC- MR
Ans. c
41. The monopolists shift up the SAC and SMC curves because of the imposition of
(a) a per unit tax
(b) a per unit price
(c) a per unit tax like variable cost
(d) a per unit excise duty
Ans. a
42. With reference to the Cournot’s model, determine which of the following statement holds true?
(a) The duopolists do not recognise their interdependence
(b) Each duopolist assumes that the other will keep its quantity constant
(c) Each duopolist assumes that the other will keep its price constant
(d) The solution stable
Ans. c
43. Consider the following statements.
1. Compared to a perfectly competitive market, a single price monopoly sets higher price.
2. Compared to a perfectly competitive industry, price monopoly produces less output. Which of the statements given above is/are correct?
(a) Only
(c) Both 1 and 2
(b) Only
(d) None these
Ans. c
44. Which of the following market type has only a few competing firms?
(a) Oligopoly
(c) Perfect competition
(b) Monopoly
(d) Monopolistic competition
Ans. a
45. When entry into the industry is open and the industry is at long-run equilibrium, the firm in monopolistic competition will .. produce at the lowest point on its LAC curve.
(a) always
(c) sometimes
(b) never
(d) cannot say
Ans. b
46. Which one of the following statements is/are not correct?
1. In perfect competition, there is a large number of independent sellers, each too small to affect the commodity price.
2. In perfect competition the product of all firmns are homogeneous or identical. In perfect competition, the firm can easily enter or leave the industry.
4. In perfect competition, the product of all firms are different.
3.
(b) 3 and 4
(d) Only 3
(a) 1 and 2
(c) Only 4
Ans. c
47. What the difference een perfect competition and monopolistic competition?
(a) Perfect competition has barriers to entry while monopolistic competition does not
(b) In perfect competition, firms produce identical goods while in monopolistic competition, firms produce slightly different goods
(c) Perfect competition has no barriers to entry while monopolistic competition does
(d) Pertect competition has a large number of small firms while monopolistic does not
Ans. b
48. If you have found the percentage of the value of sales accounted for by the four largest firms in an industry, you have found the
(a) four firms concentration ratio
(b) elasticity of demand value
(c) elasticity of supply value
(d) Herfindahl-Hirschman index
Ans. a
49. Equilibrium condition of a profit maximising firm is
1. Supply equals demand.
2. MR equals to AC.
3. MR equals to MC.
4. LMR equals LAC.
(b) 2 and 3 only
(a) 1 and 2 only
(c) 3 and 4 only
(d) 3 only
Ans. d
50. Under imperfect competition, degree of monopoly power depends upon difference between
(a) MR and MC
(c) AC and MC
(b) MR and AC
(d) None of these
Ans. d
51. ‘Each duopolist assumes that others will keep their prices constant’. This is correct in the case of
(a) Lorentz’s curve
(c) Edgeworth’s model
(b) Phillips curve
(d) Contract curve
Ans. c
52. According to Baumol, ‘sales maximisation’ means
(a) maximisation of marginal revenue
(b) maximisation of average revenue
(c) maximisation of total revenue
(d) None of the above
Ans. c
53. Each seller assumes his rival’s price as being constant under the
(a) Bertrand’s model
(b) Edgeworth’s model
(c) Duopoly model
(d) Price leadership model
Ans. b
54. Which of the following is a characteristic of monopoly?
(a) One seller of the product
(b) Low barriers to entry
(c) Close substitutes of products
(d) Perfect intormation
Ans. a
55. If the firms under perfect competition have different costs, abnormal profits will be earned in the long-run only by
(a) marginal firm
(c) intra-marginal firm
(b) all the firms
(d) None of these
Ans. c
56. Bounded rationality means
(a) prudent behaviour under a given set of circumstances
(b) normal behaviour under a given set of circumstances
(c) abnormal behaviour under a given set of circumstances
(d) irrational behaviour under a given set of circumstances
Ans. a
57. A firm under perfect competition faces for its product
(a) a horizontal demand curve
(b) a downward sloping demand curve
(c) an upward rising demand curve
(d) a vertical demand curve
Ans. a
59. Which of the following is true for collusive oligopoly?
(a) Oligopoly with lower cost firms as leader
(b) Cartel aiming at joint profit maximisation
(c) Oligopoly with dominant firms as leader
(d) None of the above
Ans. b
60. Firms use marketing
(a) persuade buyers that their product nuperior ta others
(b) influence a consumer’s buying decision
(c) convince customers that their product is worth its price
(d) All of the above
Ans. d
61. A monopolistically competitive market is distinguished from a perfectly competitive market by the fact that
(a) it contains few buyers
(b) it contains few sellers
(c) it deals in differentiated products
(d) All of the above
Ans. c
62. In price discrimination, which section of the market is charged the higher price?
(a) The section with the richest people
(b) The section with the oldest people
(c) The section with the most inelastic demand
Ans. c
63. The section with the most elastic demand Which of the following market type has all firms selling products so identical that buyers do not care from which firm they buy?
(a) Perfect competition
(c) Oligopoly
(b) Monopoistic competition
(d) Monopoly
Ans. a
64. Which of the following market type has the fewest number of firms?
(a) Oligopoly
(c) Monopolistic cormpetition
(d) Perfect competition
(b) Monopoly
Ans. b
65. Which of the following market type has a large number of firms that sell similar but slightly different products?
(a) Monopoly
(c) Perfect competition
(b) Oligopoly
(d) Monopolistic competition
Ans. d
66. The market type known as perfect competition is
(a) marked by firms continuously trying to change their products so that consumers prefer their products to their products
(b) dominated by fierce advertising campaigns
(c) highly competitive and firms find it impossible to eam an economic profit in the long-run
(d) aimost free from competition and firms earm large profits etitor’s
Ans. c
67. In the short-run, the monopolist
(a) increases a los
(b) breaks down
(d) All of these
(c) makes a profit
Ans. d
68. Consider the following statements.
1. Because of a number of firms in monopolistic competition, no one firm can dominate the market.
2. With a natural monopoly, regulation can take the form of average cost pricing to allow coverage of costs.
3. If a large number of firms are competing, the market could be perfect competition or monopolistic competition. Which of the statements given above are correct? 1 and 2
(c) 1 and 3
(b) 2 and 3
(d) All of these
Ans. d
69. If the monopoly profits were to add to costs so that costs rqualled revenue, even if the average cost curve exclusive of profits was rising, the average cost curve obtained from the first operation is
(a) necessarily decreasing at the equilibrium output
(b) necessarily increasing at the equilibirum output
(c) necessarily increasing at the equilibrium price
(d) necessarily decreasing at the equilibrium price
Ans. a
70. Perfect competition is characterised by all the following except
(a) considerable advertising by individual firms
(b) no restrictions on entry into or exit from the industry
(c) a large number of buyers and sellers
(d) well-informed buyers and sellers with respect to prices
Ans. a
71. Excess capacity is not found under
(a) monopoly
(c) monopolistic competition
(d) perfect competition
(b) oligopoly
Ans. d
72. Consumers likely to get variety of goods under
(a) perfect competition
(c) imperfect competition
(b) monopoly
(d) oligopoly
Ans. c
73. The best level of output for the pure monopolist occurs the point where
(a) TC is minimum
(b) TR= TC
(c) TR and TC curves are parallel
(d) TR is maximum
Ans. c
74. When the TR curve and TC curve are parallel and exceeds TC
(a) normal profit is maximised
(b) normal profit is minimised
(c) total profit is maximised
(d) total profit is minimised
Ans. c
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75. If P= 10 at the point on the demand curve where ea =0.5, then MR is
(a) 5
(c) rs. 1
(b) rs. 20
(d) rs. 10
Ans. d
76. An oligopolistic firm
(a) is a price taker
(b) sells a product for which there are no good substitutes
(C) does not influence the actions of the other firms
(d) None of the above
Ans. d
77. Under price discrimination, price will be higher in market where demand is
(a) unitary elastic
(c) less elastic
(b) highly elastic
(d) None of these
Ans. c
78. Which of the following four firms concentration ratio would be the best indication of a perfectly competitive industry?
(a) 31%
78%
(b) 0.25%
(d) 100%
Ans. b
79. Cyert and March theory of firm explains following goal of the firm?
(a) Producer goal and market share goal
(b) Inventory goal and sales goal
(c) Profit goal and production goal
(d) All of the above
Ans. d
80. According to WJ Baumol, the typical oligopolist’s objective is
(a) sales maximisc ion subject to minimum profit constraint
(b) to attain maximum profit
(c) to incur minimum cost
(d) to get maximum output with minimum cost
Ans. a
81. Who was the first economist to formulate the limit price theory?
(a) Joe S Bain
(b) WJ Baumol
(c) John F Dew
(d) None of the above
Ans. a
82. Monopolistic competition differs competition primarily because
(a) in monopolistic competition, entry into the industry is biocked
(b) in monopolistic competition, firms can differentiate their products
(c) in monopolistic competition, there are relatively few barriers to entry from perfect
(d) in perfect competition, firms can differentiate their products
Ans. b
83. In a monopoly market, an upward shift in the market demand results in a new equilibrium with
(a) a higher quantity and the same price
(b) a higher quantity and a lower price
(c) a higher quantity and a higher price
(d) Can be either of the above
Ans. d
84. A perfectly competitive firm will always expands output as long as
(a) rising marginal cost is less than price
(b) rising marginal cost is less than the marginal revenue
(c) rising marginal cost is less than the average cost
(d) None of the above
Ans. d
85. Compared to the case of perfect competition, a monopolist is more likely to
(a) charge a higher price
(b) produce a lower quantity of the product
(c) make a greater amount of economic profit
(d) All of the above
Ans. d
86. The amount of X which will be put on the market at certain price in a given period means
(a) demand schedule of cormmodity X
(b) supply schedule of commodity X
(c) market demand curve
(d) market supply curve
Ans. b
87. When the D curve is elastic, MR is
(a) negative
(b) positive
(c) neither positive nor negative
(d) unity
88. Discriminating monopoly is possible, if two markets have
(a) rising cost curve
(b) rising and declining cost curve
(c) differente,
(d) equal e,
Ans. a
89. Price discrimination will always lead to
(a) increase in output
(b) decrease in output
(c) no change in output
(d) None of these
Ans. c
90. While analysing Marshall’s measure of consumer’s surplus, one assumes
(a) perfect competition
(b) monopoly
(c) imperfect competition
(d) monopsony
Ans. a
91. In constant sum game, what is true?
(a) What one player gains, the other looses
(b) Both players get equal gains
(c) Both players adopt the same strategies
(d) Mixed strategies are adopted by the players
Ans. a
92. Who developed the theory of game?
(a) Newmanm and Morgenstern
(b) William J Baumol
(c) JR Hicks
(d) Samuelson PT
Ans. a
93. A firm’s over-riding objective is to
(a) maximise economic profit
(b) avoid an economic loss
(c) maximise total revenue
(d) earn a normal profit
Ans. a
94. Monopoly can be established by
(b) cartel
(d) All of these
(a) patent right
(c) government license
Ans. d
95. Which the following four firms concentration ratio is consistent with monopolistic competition?
(a) 75%
(c) 0%
(b) 100%
(d) 25%
Ans. d
96. What is a saddle point?
(a) Balanced growth point
(b) Imbalanced growth point
(c) Equilibrium point
(d) Unstable equilibrium point
Ans. c
97. Which form of monopoly regulation is advantageous for the consumer? most
(b) Lumpsum tax
(d) All of these
(a) Price control
(c) Per unit tax
Ans. a
99. Optimal resource allocation in the economy is attained at the situation where
(a) indifference curve is at its peak, i.e. at IC3.
(b) indifference curve is tangent on production possibility curve
(c) indifference curve intersects PPC at point ‘a’ or ‘b’
(d) None of the above
Ans. b
100. At the point of tangency of PPC and indifference curve,
(a) MRS> MRT
(b) MRS= MRTS
(c) MRS = MRT= MRTS
(d) MRS = MRT
Ans. c
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